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LATEST ARTICLES
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Currency volatility benchmarking has become a useful tool for FX traders but is by no means the only option for informing trades.
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The immediate aftermath of the launch of T+1 settlement in the US on May 28 suggests the acceleration has not yet translated into increased FX risk. But it is still too early to tell what the longer-term impact will be.
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MBridge, China’s cross-border digital currency initiative, has entered the minimum viable product stage. It is the world’s most advanced cross-border CBDC and stands on the cusp of playing a pivotal role in the de-dollarization process.
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The recent resurgence in M&A activity has driven interest in deal-contingent hedging as firms look for a buffer against unfavourable FX or interest-rate movements.
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The absence of staking and the earlier approval of spot Bitcoin exchange-traded funds have sucked much of the excitement out of the SEC’s surprising decision to greenlight spot Ethereum ETFs.
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The prospect of interest rate cuts from the Fed in 2024 is disappearing. Japan and Korea are among those feeling the heat.
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Blurring the lines in foreign exchange between automation, traditional AI and generative AI runs the risk of undermining trading services by setting unrealistic expectations.
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A lack of consensus on whether recent under-performance of Asian currencies will impact China’s willingness to let its own currency weaken is leading to disparate views on near-term valuations.
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The body responsible for settling about $6.5 trillion of global daily FX trades has decided against extending its deadlines to accommodate non-US participants who still want to use its next-day settlement service. But it expects the impact to be limited – far too limited to justify the complexity that a change would impose on its members.
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Previous changes of policy direction have left analysts undecided on whether to attribute recent sharp corrections to the renminbi reference rate to accident or design – or even a combination of the two.
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Despite overlapping in a number of key workflow areas, asset managers continue to face challenges with FX order management systems that struggle to emulate the capabilities of systems designed to manage execution.
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Carry traders are going to have to work hard to maintain the momentum of the last few months if expectations of interest rate cuts in the US and hikes in Japan come to pass.
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Perception appears to be just as important as reality when it comes to buy-side firms viewing themselves as FX liquidity providers.
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Boosting the role of corporate treasury by enabling it to centralize group-wide FX management may sound appealing, but implementation and cost challenges should not be underestimated.
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Investors will be hoping that the fall in the value of Bitcoin since US regulators approved the listing and trading of spot Bitcoin exchange-traded products is not a sign of things to come.
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Corporates are adopting a variety of approaches to mitigate the impact of uncertainty in foreign exchange markets caused by divergence in economic policy and performance.
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Ambitious brokerage firms have precipitated a shift in demand for FX licences, with interest in regulated European and Asian markets on the increase at the expense of offshore jurisdictions.
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Is the CME’s new spot FX marketplace further evidence of the trend towards futures and options trading, and away from private deals?
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Many corporates are realising the benefits of intercompany netting on FX risk, trading and cash-flow visibility.
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Spoiled for choice, FX brokers have become more strategic – and selective – when it comes to choosing liquidity providers.
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While many African countries experienced lower interbank FX turnover and saw their foreign-exchange reserves dwindle last year, there are grounds for optimism that 2023 will turn out to be a better year at both regional and national level.
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Markets jump on the news that Javier Milei will be Argentina’s next president. A large devaluation is needed, but that leads to the risk of deposit flight.
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While the dollar’s international supremacy is unchallenged for now, the wider landscape is shifting. Companies are raising more funding in renminbi and the currency’s use in international payments and settlements is growing.
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Corporates are taking a big punt on markets remaining relatively benign, given their apparent lack of confidence in existing FX technology and systems.
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The big custody banks are pursuing a variety of digital-asset custody strategies to encourage wider market participation from institutional clients.
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The controversy surrounding My Forex Funds has reinforced the view that tighter regulation of foreign-exchange proprietary trading firms is inevitable.
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Euromoney talks to Jacques Levet, chief digital officer at BNP Paribas, about the competitive advantage that newly acquired FX fintech Kantox offers.
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Market participants have welcomed recent moves to enhance FX liquidity by increasing the efficiency of credit payments for trades.
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The frontrunner in the Argentine presidential election campaign has said he wants to abolish the peso and replace it with the US dollar. Is it blue-sky thinking or just greenback dreaming?
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European corporates have been the big losers from lower overall FX market volatility in the first half of 2023 as EUR/USD normalised while the yen and yuan continued to struggle.
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Despite suggestions that corporates in North America are keen to work with a wider variety of FX counterparties, global banks are relaxed about the potential impact of March’s banking crisis on this lucrative business line.
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Analysts are looking beyond China for clues as to where the main Asian currencies will go over the remainder of 2023 as they try to second-guess Japan’s monetary policy plans.
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With artificial intelligence already widely used for tasks such as trend analysis, the focus has turned to how artificial general intelligence could chat with FX traders to help them fine-tune their decisions, as well as automate order execution and currency monitoring.
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Faster securities settlement raises the spectre of increased FX risk as brokers work through the challenges of achieving simultaneous execution of equity and currency trades.
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New entrants into the FX market raise the challenge for the body responsible for rules governing FX derivatives, as it mulls the possibility of future updates to how these products are documented and traded.
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Extreme FX volatility is proving a challenge for some finance directors who are struggling to minimize the impact on their bottom line.
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The standardized approach for counterparty credit risk has not yet proved to be the catalyst for greater use of clearing in the FX market that some expected.
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Recent developments in crypto have hardened the view that convergence between digital and fiat currency trading structures is both inevitable and desirable.
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The acquisitive fintech group reckons it can accelerate the transition from legacy FX technology by making it easier for tech firms to get their products to market.
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Disagreement over where US interest rates are going has split opinion on overall prospects for emerging market currencies.
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Central limit order book venues have done well during the past 12 months, but it would be premature to view this as a permanent shift in trading preference.
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Big foreign-exchange banks are focussing on enhanced functionality to promote greater use of single-dealer platforms.
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The IMF will have its work cut out generating support for its proposal for a multilateral platform for cross-border payments and related foreign-exchange transactions.
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The volume of FX trading where there is a possibility of one or more parties failing to deliver on the terms of the trade has prompted various initiatives to find better options for settlement – but the talk is still more about potential than delivery.
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When the news broke that Argentina was thinking of merging its currency with that of its neighbour, Brazil, my immediate question was: which Argentine peso?
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While no one is willing to bet the farm on anything other than dollar depreciation in 2023, mixed messages from the Fed, and economic and political uncertainty elsewhere mean the greenback could yet defy expectations.
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Some leading FX banks have struggled to stay competitive in forwards, swaps and swaptions thanks to SA-CCR rules, but compressing portfolios helps.
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Going all out to keep the sell side sweet seems a sensible strategy for success in the difficult P2P FX market.
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With little likelihood of currency volatility subsiding any time soon, corporates continue to face difficult decisions when it comes to how best to mitigate FX risk.
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FX dealer trading with financial customers may have stagnated over the last few years, but the effects have not been felt evenly across all markets and the impact on price discovery is far from clear.
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Despite dire warnings by the Bank for International Settlements, market participants are not wholly convinced that US dollar obligations from FX swaps and forwards pose a threat to the stability of the forex market.
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Concerns about the wider economy and its impact on disposable income have eroded individuals’ appetite for FX trading, despite attractive levels of volatility.
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State Street’s Chip Lowry, a board member and former chair of the Foreign Exchange Professionals Association, talks to Euromoney about his new role on the Commodity Futures Trading Commission’s market risk advisory committee.
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As the industry digests the results of the latest BIS triennial FX survey, Euromoney canvasses opinion on the implications of the key findings.
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Market experts fear that continued inflation and poor growth mean that many currencies are vulnerable to the pressure that the UK has seen recently.
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Asia’s central banks have fought hard to protect the value of their currencies this year as the dollar has soared. But each of them has a limit to their appetite for that defence.
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The weakness of the pound and strength of the dollar has implications for companies on both sides of the Atlantic.
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The market for remittances is expected to grow by almost 10% in 2022, driven by diaspora-linked savings.
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Recent volatility has encouraged many corporates to switch out of longer tenor instruments.
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In public at least, the Bank of England has been determined to end its gilts intervention when it said it would, but it’s getting harder for the BoE to manage its conflicts – and the market doesn’t know what to believe any more.
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While the UK government remains unwilling to make notable concessions on its economic policies, the Bank of England will struggle to restore confidence in the embattled pound.
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Kwasi Kwarteng’s debt-funded tax giveaway has re-priced UK risk at a stroke, but the high cost may bring scarce benefit.
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The recent multi-decade lows experienced by the pound and the yen may have different origins, but they are also a reminder that history has a habit of repeating itself.
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Removing UK bonus caps and undermining the BoE could exacerbate a sterling crisis while entrenching US IB dominance.
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Europe and the US remain the focus, but LatAm and Asia Pacific will also contribute to volatility in 2022.
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The strength of the Australian economy is not enough to convince analysts it is a good time to increase AUD exposure.
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Holders of cryptocurrency pay a heavy price for greater privacy.
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UK policymakers are trapped between reducing inflation and boosting the flagging economy.
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Progress on implementing the proposed minimum global tax rate may be uneven, but it will have implications for all.
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China’s support for Russia is part of its strategy to reduce the world’s dependence on the greenback – might it work?
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Despite some notable challenges, Latin American currencies could continue to surprise in the second half of the year.
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Patchy inter-company loan administration could leave corporates exposed to breaches of transfer pricing guidance.
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The results of this year’s Euromoney FX survey highlight the value of long-term strategic investment in forex.
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Markets are trading interest-rate expectations over actual rate decisions – proving the power of market sentiment.
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Digitalizing and automating its FX risk management has notably improved a pharma's treasury function.
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FX analysts have diverging views on the prospects for the euro over the coming months, after a bank research warning.
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European corporates saw losses from currency volatility fall late last year, so hedging has stayed largely unchanged.
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The currency’s fairly benign passage through the early months of 2022 is now under threat from a variety of factors, including spiralling inflation, the cost of supporting the currency and even a growing interest in cryptocurrency.
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With the US Federal Reserve apparently keen to step up the pace of interest-rate rises over the coming months, it is not just emerging market currencies that are expected to suffer.
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Rate increases in major economies away from the US, as central banks battle spiralling inflation, have weakened the momentum the dollar might otherwise have garnered from a hawkish Fed.
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A number of commodity currencies have received an unexpected boost from the conflict in Ukraine as Western economies look to reduce their dependence on fossil fuels from Russia more rapidly than previously planned.
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A combination of geographical position and commodity strength is working in the country’s favour.
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When a group of leading banks were unable to source the roubles needed to deliver in settlement of FX swaps, compression trades saved the day. The episode serves to highlight how fragile very large, complex and interconnected financial markets have become.
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China’s approach to central bank digital currency offers clues to how it may build a unique version of decentralized finance.
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Despite China’s ambitious plans for its digital currency, the e-yuan will struggle to become a lead player in international trade finance without notable changes, most importantly to capital controls.
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With little chance of a swift resolution to the conflict in Ukraine, the effect on FX markets is being felt well beyond the bounds of the former Soviet Union. But not all reactions have been typical for a crisis.
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Chinese policymakers may have become more relaxed about fluctuations in the yuan, but no one should doubt their willingness to intervene if the currency moves too far in either direction.
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After a generation of low inflation, rising consumer and business costs have leapt to the top of the list of factors influencing FX pricing.
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Analysts are keeping a close eye on regional as well as US monetary policy as they attempt to plot a course for the currencies of the countries that form the Association of Southeast Asian Nations.
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Many observers remain unconvinced about the Scottish government’s official currency if the country were ever to gain independence.
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Turkey’s currency continues to flounder, with hardline president Erdoğan apparently determined to prove that the best way to curb inflation is to reduce – rather than increase – interest rates.
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Rebooting the financial system with a new currency could be what’s needed to give Argentina’s economy a way forward.
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The Japanese currency continues to slide as traders anticipate interest-rate movement in the US, but even the Fed's hawkish tilt does not guarantee that this direction of travel will be sustained.
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As COP26 winds up, Euromoney looks at how a big reduction in fossil-fuel consumption might impact the currencies of the world’s leading coal and oil exporters.
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Foreign exchange forwards do not fall within the scope of uncleared margin rules, but that does not mean those rules have no effect on the FX business. Firms are having to consider the pros and cons of switching to cleared trades to avoid being impacted.
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Increased intracontinental trade in Africa is a laudable objective, but may serve to highlight disparities in exchange-rate regimes that could further widen the gap between winners and losers.
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Increased trading of emerging market FX has prompted settlement provider CLS and some of the world’s largest banks to explore options for extending payment-versus-payment to a wider range of currencies.
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China’s qualified domestic limited partnership scheme, which lets foreign asset managers raise money onshore in renminbi to invest offshore, is taking shape – but it is complex. Euromoney has some tips designed to stop you wasting time and money.
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Buoyed by the surge in retail trading during the past 18 months, Global Kapital Group is targeting expansion beyond its established FX brokerage business.
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Social media celebrities and financial markets might seem like strange bedfellows, but there is nothing phony about the growth of retail FX trading.
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The European Banking Authority’s public consultation on guidelines for compliance officers once again highlights the vital role played by FX brokerage compliance teams in combatting financial crime.
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As FX traders ponder how the recent increase in coronavirus cases might affect the global economy, it appears they are spending even more time trying to second guess central bank thinking.
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Recent reports concerning a payment made by Deutsche Bank to Europe’s largest winery are a reminder that disputes over FX derivatives mis-selling have yet to run their course.
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Deal strengthens SGX in the FX OTC market, bringing it closer to being the full-service operator Boon Chye Loh wants it to be.
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New FX platform MillTechFX reckons that rather than cannibalizing existing trading activity, it can generate new flows for its counterparty banks by undercutting standard exchange rates.
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This year’s FX survey reflects huge disruption and transition across the industry. Pandemic-driven technological advances saw traders tackle a surge in business while working remotely – supercharging change that will permanently alter the way the industry operates.
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A platform that promises to shake up the FX swaps market has taken another tentative step towards its objective of reducing banks’ liquidity buffer challenge.
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HSBC’s new global wallet offering is the latest in a line of services enabling businesses to make and receive international payments from a single account.
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Siren promises reductions in FX execution costs compared with the WM/Refinitiv 4pm fix. The challenge now is to persuade banks, asset managers and large funds to execute trades on the benchmark.
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Sceptics may express concern about the disconnect between commodity prices and the value of commodity-linked currencies, but analysts reckon there is still value in the likes of the Mexican peso, Brazilian real and Australian dollar
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Basel’s latest effort to improve market resilience is expected to accelerate the development of clearing solutions – but it won’t leave everyone better off.
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The leading FX banks have introduced notable enhancements to their electronic trading platforms in recent months in an attempt to make them more attractive to traders that are still working away from their offices.
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Analysts are positive about sterling’s prospects over the next few months, figuring that monetary policy flexibility and attractive UK equity prices will outweigh any downward pressure from the European Union – whether trade or coronavirus-related.
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Corporates have a variety of tools at their disposal when it comes to getting around regulatory restrictions relating to cross-border liquidity and currency management.
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Outsourced FX trading providers have seen growing interest in their services from a wider variety of clients during the past 12 months as fee pressures and coronavirus restrictions impact on fund managers’ operating models.
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Yet another platform is attempting to crack the notoriously challenging corporate peer-to-peer FX market with the promise of simplifying trading for buy-side clients.
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The Covid-19 pandemic has prompted corporates to look afresh at automation and efficiency in their processes. Deutsche Bank sees a gap – even in currency-restricted markets.
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Corporate treasurers have much to gain from improving their understanding of liquidity venues and trading options.
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Heads of research are seeing increased demand from clients for FX market intelligence, as a focus on reflation has created a complex investment environment in which investors are grappling with the question of when reflation becomes inflation.
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The Bank of England’s latest FX trading survey shows how sterling trading exploded in October amid the twin pressures of Brexit and the coronavirus pandemic.
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Emerging markets have regained some of the buoyancy lost during the early months of the coronavirus crisis, but analyst opinions hint at the difficulty of identifying which EM currencies investors should favour.
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The coronavirus crisis has accelerated market trends: in FX it has made clients even more amenable to expanding their universe of liquidity providers to non-banks
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Agreement on the long-awaited US coronavirus relief bill has created further downward pressure on the dollar at the start of a year in which analysts expect economic headwinds to devalue the greenback.
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The congressional debate on Mexico's controversial proposed currency bill has been postponed, but opponents, including the country's central bank, should not celebrate too soon.
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Adopting orthodox policies in a bid to secure IMF agreement is a positive for Argentina, but regulations still restrict the banks compounding big FX exposures.
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The BIS markets committee might be fretting over how execution algos can exacerbate risk in the FX market, but others are more interested in what it thinks about liquidity indicators and access to data.
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The rand is back to pre-pandemic levels despite little confidence in the South African government’s ability to revitalize its economy.
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There is broad agreement that the ECB will not cut rates further, but the coronavirus pandemic is seen as the key factor governing the outlook for the euro.
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A new book concludes that the rules for trading EM FX and fixed income have successfully survived Covid.
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Turkey’s FX strategy might look odd but, despite the damage it is wreaking on the lira, analysts doubt that the country’s economic policies will change.
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While the FX non-deliverable forward (NDF) market has demonstrated its resilience in the face of a spike in spreads during the early stages of coronavirus, there are concerns over its capacity to destabilize onshore markets in emerging economies.
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Solutions providers point to an upsurge in interest this year from regional banks looking to outsource some or all of their FX trading.
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Multi-dealer platforms may remain bullish about their prospects, but if other banks follow Citi’s lead and pull away from them, market share may continue to fall.
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The FX settlement provider has recognised that risks are higher for currencies outside its scope; finding a solution, particularly one that includes the renminbi, could be tough.
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The results of the latest Bank of England foreign exchange turnover survey have again highlighted the vulnerability of sterling in stressed market conditions.
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Analysts expect the European recovery fund to underpin a strengthening of the single currency against the dollar over the rest of this year and beyond.
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JPMorgan recorded a hat-trick in the liquidity rankings, but it was all change in many other areas of this year’s Euromoney FX poll.
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As Iran’s currency crisis deepens, observers fear that far from improving the situation, state intervention will do further damage to a country that was in economic turmoil even before coronavirus.
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Lack of confidence in the quality of their information – and their ability to analyze it – means many of the world’s largest companies continue to eschew one of the techniques designed to assess and manage FX risk.
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Hedging may look expensive for businesses that have seen their revenues cut heavily by Covid-19 prevention measures, but removing hedges for currencies to which they have limited exposure may prove even more so.
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Euromoney magazine has released the results of its 42nd annual foreign exchange ranking, the most comprehensive quantitative and qualitative annual study available on the FX markets.
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Euromoney magazine has released the results of its 42nd annual foreign exchange survey, the most comprehensive quantitative and qualitative annual study available on the FX markets.
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Emerging market currencies look set to continue their bumpy ride over the coming months as the potential for a second wave of coronavirus outbreaks weighs on Asian currency sentiment.
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Hedge funds and real money clients looking to shake up their FX trading strategy now have the option of basing their trades on proprietary market analysis from RBC.
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US users see weaknesses in transaction cost analysis and order management integration.
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FX trading algorithms are getting smarter at dealing with crises – and getting more popular as a result.
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The six exchange-rate system is now untenable, with the currency losing more than 50% of its value since October, but analysts say floating the currency will cause more pain without IMF support.
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Liquidity data from CLS has revealed unusual trading activity around the 4pm London fix – but it has more to do with corporate inertia than market manipulation.
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The FX market has quickly adapted to the changes imposed by global Covid-19 response measures. The challenge for the banks will be to manage the next phase of the lockdown when clients will expect them to do more than just keep the lights on.
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The economic fallout from the virus is beginning to impact regional currencies and growth forecasts.
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P2P currency matching has had yet another makeover with the introduction of a service focusing on the swaps market rather than spot flow.
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Margin pressures on buy-side clients such as asset managers have prompted increased interest in outsourced FX solutions, but firms must know exactly what they are paying for.
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In 2016, China’s currency seemed on target for global reserve status. These days, the renminbi appears stuck in reverse, with Beijing looking on passively as its status shrinks and it slides down the global rankings.
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Euromoney's latest coverage of how Beijing is seeking to globalize the renminbi, through currency swaps and trade-financing facilities; the rise of the offshore bond market; and how fee-hungry banks are salivating at the prospect of the RMB’s growth.
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FX market participants are responding to Singapore’s desire for physical location of matching and pricing engines in the city-state.
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Regulatory technology vendors are relishing the prospect of helping banks minimize FX client onboarding errors, but in a world where legacy systems remain commonplace, regtech is not always an easy sell.
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Leading exchanges have seen little return from their investment in electronic trading venues and face some tough decisions over how to increase revenues.
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The international exchange’s clearing offering for EUR/USD and GBP/USD cross-currency swap transactions marks another modest step towards wider use of central clearing in FX.
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Brazil’s currency hit an all-time low nominal value on November 18, closing trading at R$4.20 to the dollar.
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Implementation of FX transaction cost analysis (TCA) appears to have stalled, with the impracticality of conducting analysis across every available venue encouraging many parties to rely on venues or dealers to measure execution, despite concerns over transparency and impartiality.
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Corporates often perceive options as an expensive means of hedging FX risk compared with forwards, but a number of market developments have increased their attractiveness as a tool for reducing currency exposure.
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Esma no longer feels it needs to impose EU-wide leverage limits on the FX contracts for difference (CFDs) market, but there is little evidence to suggest its efforts to protect retail traders have done anything other than push business offshore.
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Corporates' increasing need to use treasury resources more efficiently has persuaded BNP Paribas to partner with fintech Kantox to offer a new dynamic hedging solution to clients.
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While spot volumes remain below 2013 levels, the latest BIS triennial central bank survey notes that FX markets have recovered from the decline recorded in 2016 on the back of strong growth in swap and forward transactions.
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It has just received a very public vote of no-confidence from non-bank liquidity providers, but concerns around transparency are yet to outweigh the perceived benefits of last look.
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Cash flow at risk and earnings at risk can help ensure FX risks are reported correctly, but treasurers need to do more to convince senior management to move away from tried and trusted methods that are no longer fit for purpose.
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Other players are expected to follow Goldman Sachs and BNP Paribas in introducing algos designed to source both internal and external liquidity for FX NDFs, despite limited liquidity in many non-deliverable currencies.
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A reluctance to dispense with legacy technology, combined with heightened regulatory oversight and changing liquidity provision from banks, has seriously complicated the execution management system (EMS) selection process for FX traders.
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Questions about Deutsche Bank's restructuring multiply with each tactical shift, increasing the premium placed on any areas of real success – such as its Autobahn platform.
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While Euromoney turns 50 this year, our first big survey was launched 40 years ago – and to this day, the FX survey remains the benchmark for the foreign exchange industry. We look back on four decades of data to analyze how the market and the competitive landscape have changed.
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While the ability to run simulations based on hypothetical future as well as historic data is appealing, there is no guarantee that testing algos against both types would make them operate more efficiently in stressed market environments.
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Citi’s latest global corporate benchmarking survey shows that companies are worryingly complacent about their potential exposure to emerging market currencies and remain reliant on manual processes to manage risk.
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The recent withdrawal of Stater Global Markets from the prime-of-prime broker market has underlined the need for providers to continue to prove their value to clients.
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Euromoney magazine has released the results of its 41st annual foreign exchange ranking, the most comprehensive quantitative and qualitative annual study available on the FX markets.
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This year’s Euromoney FX survey results show up some important multi-year trends. The main lesson? Foreign exchange is more competitive than ever.
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Space constraints in data centres, coupled with cost considerations, have encouraged firms to seek creative solutions to the challenge of getting access to the main liquidity hubs.
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The lack of a unified approach to circuit breakers in the FX market is said to be reinforcing loyalty to OTC trading and stifling enthusiasm for exchange-based activity, despite the protections such mechanisms can offer.
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While all the conditions for increased corporate enthusiasm for foreign exchange hedging appear to be in place, uneven demand suggests lack of consensus on how best to manage currency volatility.
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The absence of a regulatory imperative has not deterred FX traders from increasing their use of transaction cost analysis tools, in turn increasing the pressure on brokers at a time when margins are already thin.
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The 100-day mark of Brazil’s new president, Jair Bolsonaro, has recently passed; no one – not even the government itself – pretended the time had been well spent.
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FX prime brokers are expected to adapt to the pricing challenges of uncleared margin rules, but it remains far from clear whether these rules will push the market definitively in the direction of central clearing.
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Humanitarian crises are emerging market issues and local banks are the best way to distribute aid. Banks should make it easier and cheaper to get funds to them.
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Determining when a client is in distress is not always a straightforward process – banks and FX platforms need to have processes in place to ensure losses are not compounded.
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Bundling FX and non-FX services has become an established strategy for smaller prime brokers seeking a foothold in a market where the barriers to entry remain dauntingly high.
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Macro and monetary policy factors are affecting some currencies more than traditional commodity triggers.
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Option trading has grown, while forwards and swaps have fallen.
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The ability of AI to help retail FX brokers is quickly moving from the theoretical to the practical; the result should be better operational efficiency and better trader services.
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The operators of FX platforms deny that credit management has failed to keep pace with the development of automated trading – but they do acknowledge that the process could be more efficient.
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Volatility in China and increased onshore access means a greater need for hedging; Singapore also building offshore rupee traction.
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Having tested HSBC FX Everywhere on internal payments, the bank now aims to provide it as a platform service to clients.
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Stop-loss orders have proved their worth again in 2018, protecting retail FX traders in particular from increased volatility in emerging market currencies.
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Investors continue to shy away from currency-hedged ETFs despite their positive short- and medium-term performance.
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Analysts believe Virtu Financial’s acquisition of ITG is largely a positive development for customers of both firms and the wider FX market, despite lingering concerns over access to institutional customer data.
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CLSNet – a new payments netting service for FX trades – aims to reduce costs and increase liquidity for market participants.
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The role of quantitative traders in the FX market is becoming ever more significant, as the amount of business executed via algorithms continues to increase.
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Under-investment in post-trade infrastructure is driving interest in distributed ledger technology as a means of reducing back-office costs.
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A combination of regulatory requirements and commercial imperatives are driving interest in quality execution analysis (QEA), a subset of transaction cost analysis (TCA) that is a vital component in measuring FX best execution.
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The distinction between retail and institutional FX business is well established, but there is a growing sense that both types of client can be supported on the same platform.
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Another financial crisis has rocked the country. As it slips into what could be a deep recession, time is running out to achieve the recovery that could create the conditions for a pro-market candidate to win next year’s presidential elections.
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Marex Spectron is making a low-key return to the FX market, just over four years after it terminated its foreign-exchange business.
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With new US sanctions looming over Russia and the effects of higher oil prices largely already priced in, will the Russian rouble sink or swim as we approach the end of 2018?
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Speed bumps appear to be gathering favour among stock exchanges, but their potential to level the playing field in the FX market is tempered by concerns around transparency and the impact on trading costs.
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A boutique broker renowned for the accuracy of its currency forecasts has warned that a no-deal Brexit could see the pound fall to parity with the euro by the middle of next year.
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The UK's financial market regulator finds firms still struggling with suspicious transaction reports, but it could be bolder in its criticism.
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The market tremors from the FX-fixing scandal and subsequent probe – triggering a flurry of fines, litigation cases and prosecutions – is set to reverberate for years to come. Euromoney investigates the fallout for global banks and possible reforms.
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Some six months after its FX Link service went live, CME Group reckons the benefits are being felt beyond the OTC spot FX and FX futures markets.
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Participants and analysts have dismissed any concerns about the key findings of the BIS market committee’s electronic markets report relating to the concentration of FX turnover and spot trading fragmentation.
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Following in the footsteps of Egypt and South Africa, Nigeria has signed up for a currency swap deal with China, but are swaps all they are cracked up to be?
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Some of the proffered solutions to the difficulties of attracting real money into the cryptocurrency market continue to be of the ‘which came first’ variety, such as the hope that increased liquidity from market maturity will lead to reduced volatility.
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As few as eight significant multi-dealer platforms could remain standing after further rounds of consolidation sweep the sector, predicts a new report.
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FX data providers are surprisingly coy when it comes to discussing the extent to which they have shaken up a market that has been described as ripe for disruption.
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The southeast Asian FX market is on fire and it is set to get a further boost thanks to a combination of political and economic turbulence, a regulator committed to facilitating infrastructure investment and increased interest from non-bank market makers.
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Traders have been staying away from the Turkish currency this year as they watched a steady decline in its value against the dollar, but the recent deterioration of relations between Turkey and the US sent the currency spiralling into a full-blown crisis.
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The regulation recently adopted by the European Securities and Markets Authority (Esma) around the provision of contracts for difference (CFDs) and binary options to retail investors has raised a furore among retail traders and brokers.
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Flow Traders is confident that the approach that has made it the leading player in the European exchange-traded products (ETP) market can be replicated in FX as it looks to cash in on increased interest in non-bank market makers.
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Providers of FX contracts for differences will be monitoring their trading volumes closely over the coming weeks to see whether warnings of clients moving to unregulated providers come to pass.
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Machine learning has gained influence in FX in the last year, although many observers doubt whether the technology has completely mastered the demands of high frequency trading.
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Rules-based order routing (RBOR) has become a useful tool for achieving increased trading efficiency, although it does not automatically guarantee best execution.
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The Royal Bank of Canada is appealing a judge’s scathing verdict that it sacked a former trader in London for blowing the whistle on lax compliance, citing a ‘robust compliance culture’.
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Less onerous regulatory requirements and the proximity to markets where retail FX is prohibited continue to encourage brokers to set up shop in the Middle East, despite ongoing state protection for the Saudi Arabian currency.
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Non-bank market makers in Australian FX are not taking away many big clients from banks, but they are taking meaningful market share in smaller clients.
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The flexibility of any response to a big market event is too restricted, especially by narrow trading hours for 24-hour markets
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With less than 10 months to go until the UK formally leaves the European Union, most FX venues remain content to wait for the outcome of negotiations around key issues such as financial passporting before confirming their future strategy.
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Kevin Rodgers gives his personal views on the trial and conviction of FX banker Mark Johnson and its ramifications for global markets. Anyone working in banking should consider what it means for them.
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A strengthening dollar is going to make life harder for emerging markets, whether you want to hear it or not.
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Some of the early excitement around peer-to-peer (P2P) FX appears to have subsided, with firms suggesting that clients do not care whether trades are matched internally.
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With a spike in volatility and the opportunity to consign conduct issues to the past, this might have been a turning point for global FX, but faced with a range of challenges, many market makers are retreating to core competencies.
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Adherence to the FX Global Code has gained momentum ahead of the one-year deadline on Friday, but senior traders are concerned the buy side is less committed than the sell side.
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The Euromoney FX Survey 2018 is our 40th annual survey of liquidity consumption in the global FX markets.
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Euromoney magazine has released the results of its 40th annual foreign exchange ranking, the most comprehensive quantitative and qualitative annual study available on the FX markets.
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Banks are having to pedal back on big ambitions and focus instead on core competencies, but that could be positive for all.
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…if you’re big, fast or specialized in modern foreign exchange. That has led to dramatic changes in the volume-based rankings in our annual survey. Meanwhile, new customer satisfaction ratings give a different insight into the banks’ relationships with their clients.
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The deadline for registering statements of commitment for the global code is only a day away, and market participants are reporting difficulties finding who has signed up, with statements spread out across eight registers – but GFXC has a plan to alleviate the problem.
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The volume of sub-Saharan Africa (SSA) FX business done electronically is growing, with the large South African banks in the vanguard.
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The Global Foreign Exchange Committee (GFXC) is trumpeting the fact more than 100 market participants have made statements of commitment to the FX global code, but these organizations face obstacles to maintain adherence, according to consultants.
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A senior currency trader fired from Royal Bank of Canada is taking the bank to task at an unfair dismissal hearing that includes accusations of sloppy trading, alleged bribery and an 'incoherent and inconsistent' global FX policy that he claims no one had bothered to read.
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The sell side has largely realized the potential of technology to minimize the impact of FX market fragmentation, although experts suggest it could do more to extract value from the data generated by electronic trading.
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International investors blame political uncertainty; locals view sell-off as weakening carry-trade dynamics.
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The most active corporate FX traders have once again ramped up their use of algos, recognizing the potential for cost savings and risk management.
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The prime brokerage market will be hoping for a boost from the imminent launch of BNY Mellon’s new service, which will represent a reversal of the trend for larger banks to leave the space.
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Objective to increase transparency has largely failed but liquidity remains resilient, say senior traders.
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Global cooperation between regulators must be preserved after the UK leaves the European Union, says Kay Swinburne.
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Finance ministers and central bankers at the G20 have called for greater global coordination in their approach to cryptocurrencies, but that looks a remote prospect when different regulatory bodies in the same country cannot agree a strategy.
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China’s interbank market trading platform and infrastructure provider has ramped up its technology partnership with NEX to capitalize on the ever-increasing appetite for algorithmic trading.
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ESMA and IOSCO are looking at how best to tackle the issue of excessive leverage in the retail FX market – reactions among retail brokers are mixed.
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Traders are having to manage a surge in the number of prices they handle, as counterparties implement FX code of conduct guidelines.
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Euromoney looks at the approach taken by regulators to encouraging fintech innovation in North America, after the announcement of a formal information exchange arrangement between the UK’s Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC).
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Comments made by the US regulator at an FX industry event in Miami in February have raised the hackles of some market participants over the thorny issue of ghost or phantom liquidity.
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MarketFactory chairman James Sinclair sets out the reasons why FX liquidity could fragment further, in a new white paper.
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The findings of JPMorgan’s 2018 e-trading survey underlined yet again the importance of effective execution policies and systems.
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Industry experts on whistleblowing have been lobbying hard for reform, but it is still often the case that whistleblowers with the best of intentions have found themselves in legal grey areas, ending up blacklisted, bankrupt and unable to work in the City again.
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Volatility in Q3 led to losses for Europe’s multinationals, report shows.
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The forex market may have had a quiet 2017 with no big market dislocations, but liquidity is not as deep as it once was, while the buy side is becoming more discerning, driving changes in trading behaviour.
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JPMorgan’s annual institutional e-trading survey shows rising appetite for mobile trading, but growth in algo execution has been slower than anticipated.
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The impact of transaction cost analysis (TCA) on the FX buy side remains hard to quantify, despite the relative maturity of the technology.
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While regulators across Europe eye up – and in some cases replicate – the FCA’s regulatory sandbox, an EU-wide fintech testing platform remains far from inevitable.
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The latest cryptocurrency price crash is shining the spotlight on the regulation of these borderless, digital currencies, but the rules differ wildly from country to country; global super-regulator IOSCO is set to make an announcement.
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London-based Cash Netting Services is aiming to cut hundreds of millions of dollars in annual costs for banks by helping them find netting opportunities on a bilateral basis.
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The pace of change at Imperial FX during the past 10 months highlights the scale of the task of transitioning from high-street remittance to an online platform.
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The Association of Corporate Treasurers (ACT) has heralded a decision to include one of its members in a working group looking at the replacement for Libor.
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Global growth will be a key driver of currencies in 2018, a year in which the foreign-exchange industry will have to adapt to the strictures of Mifid II and a self-governing code of conduct.
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Euromoney speaks to some of the FX-focused companies in the third cohort of the Financial Conduct Authority’s (FCA) regulatory sandbox hoping to match the progress achieved by many of their predecessors.
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Pragma has attempted to provide some clarity to the little-understood phenomenon of flash crashes by providing a definition of the term for the first time, which it hopes will encourage further study of these market dislocations.
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The complexity of ERP and remote systems could leave treasurers exposed to FX risks. As automated systems look to fill this gap, there are still benefits from having a wide understanding of the whole business.
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Analysts’ confidence that there is untapped demand from Chinese banks to trade offshore RMB is good news for R5, which last week announced a joint venture with Shanghai Clearing House designed to connect these institutions to the London FX market.
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Innovation and price transparency around market data remain a bone of contention among FX market participants, although data providers insist they are working to reduce costs.
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FX market participants have benefited from guidance on good practices and the availability of sophisticated technological solutions, but implementing a surveillance programme remains a considerable undertaking.
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Iceland may remove, as early as the first quarter of 2018, the last of its capital restrictions imposed in the wake of its financial crisis, say market players.
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Are non-bank market makers simply repackaging existing liquidity or are they genuinely adding to market flows?
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Fees and regulatory uncertainty remain a concern for traders as cryptocurrency exchanges continue to broaden the range of fiat currencies they support.
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Fragmented liquidity has helped make financial extranets fundamentally important tools for global FX market players, but traders need to do their due diligence in picking the right fit for their strategies.
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The conviction of former HSBC trader Mark Johnson for front-running a customer FX order could transform the way dealers hedge client trades – and how they communicate with each other.
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Cryptocurrency architects have unveiled Bitcoin Gold, a new currency based on the bitcoin network set to begin trading in December, which attempts to resolve what some see as the excessive influence miners have on the bitcoin network.
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Co-location providers are getting a boost from higher levels of electronic trading, the ambitions of Asian brokers to grow their businesses in Europe, ongoing concerns over cybersecurity and regulatory factors.
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A lack of cooperation and coordination among regulators is increasing systemic risk.
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As exchanges look to snap up a bigger share of foreign-exchange business, they face the challenge of catering to investors’ multiple trading models.
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Providers of contracts for difference (CFD) trading services have launched a robust defence of their business, suggesting that traders are made fully aware of the risks involved and calling for regulators to support compliant CFD providers.
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The derivatives industry is lobbying policymakers to abandon dual-sided trade reporting, align European and US swaps rules, and ease the European Market Infrastructure Regulation’s (EMIR) burden on end-users.
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Swap execution facility (SEF) regulations, intended to increase transparency and reduce swap market risk, have been reported to impact market makers’ margins and liquidity, creating wider spreads for end-users. Here, Euromoney follows the CFTC’s SEF regulation timeline, presents market participants’ concerns, and reports on opportunities for doing business.
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Investment managers are not only bullish about their ability to manage FX volatility in their portfolios no matter what the market throws at them – they continue to see it as an opportunity to generate additional returns.
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Statements of commitment are gradually appearing, but many banks are still analyzing the provisions of the code against their own businesses before declaring adherence publicly.
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CME Group delivers a blow to last look by revealing its plans for spot FX basis spreads, just weeks before the launch of its OTC FX options clearing service.
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FX brokers are expected to leverage bank APIs to speed up client registration under the revised Payment Services Directive, despite the associated regulatory requirements.
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CLS is looking to move beyond its image as an FX market utility offering settlement plus a few extras, reorganizing itself into three distinct units – of which settlement is one – with new products announced for each.
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Volumes on TradingScreen’s newly spun-off FX platform have already doubled in size, even as parts of the market have contracted over the same time.
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A more flexible approach to software development is helping FX market participants test new products and bring them to market more quickly.
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Volatility in FX and beyond remains straitjacketed by central bank policy, but many fund managers that rely on volatility-based measures of risk might be dramatically underestimating the level of risk they are taking.
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The Financial Conduct Authority (FCA) is becoming more bullish about its regulatory sandbox, reiterating that the application of strict rules and the nurturing of innovative products and services are not mutually exclusive.
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Many traders are pushing their non-deliverable forward (NDF) trades through clearing houses to increase capital efficiency – with LCH seeing a record-breaking number in August – and R5FX hopes to push this to the next level.
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A growing number of FX traders are extolling the virtues of combining quantitative and fundamental analyses into an approach known as quantamental.
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The latest review of last look prompted by the FX global code has set off further debate over the use of holding windows and latency buffers.
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As Singapore reinforces its position as the leading FX trading centre in the Asia Pacific region, Euromoney looks at the prospects for other regional hubs.
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While Aesop was undoubtedly not thinking about currency markets when he wrote the story of The Tortoise and the Hare, low latency FX traders are increasingly realizing that speed does not necessarily equate to success.
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The foreign exchange market has long been dominated by a select group of large banks, but Euromoney’s inaugural five-star FX rankings show a different set of banks may be providing the best client service.
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Despite advances in data analytics technology, foreign-exchange trade audits remain a complex process requiring access to a wide spread of information on the client as well as the market.
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Deutsche Bank research into the use of aggregation for FX spot execution concludes that quality is better than quantity when it comes to working with liquidity providers.
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FX industry utilities have been described as a mechanism for substantially reducing post-trade costs, but while market participants are interested in the potential efficiencies they offer, enthusiasm for implementing such solutions remains patchy.
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BNP Paribas (BNPP) is the latest bank to be fined by US regulators over misconduct in its FX business. The French bank now hopes to put the episode behind it, having restructured the relevant businesses and improved its compliance processes.
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The past few years have seen CLS beef up its offerings in operational risk management well beyond its core settlement business, with services such as netting and compression; the expansion of its aggregation service to emerging market (EM) FX is the latest string to its bow.
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The man behind the company with plans to dominate Singapore’s high-volume user market in FX tells Euromoney how a higher percentage of local and regional liquidity can be kept within the island city state.
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Despite the progress of other projects applying blockchain technology to FX, Cobalt’s CEO remains confident that his post-trade processing network can reach critical mass.
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Singapore is steadily fending off threats to its position as Asia’s largest FX trading centre, threats that include liquidity concerns, growing volumes in Hong Kong and the rise of Shanghai.
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Banks consistently offer more competitive prices in spot FX than their ECN counterparts — for all but a few minutes per day — according to research conducted by Pragma, a provider of algorithmic trading technology.
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Euromoney's latest coverage of the CHF since the Swiss National Bank removed its currency floor with the euro, plus choice archive material.
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The latest venture of one of the co-founders of market infrastructure technology firm Traiana aims to boost the confidence of banks and buyside firms in financial technology by simplifying the process of managing risk across multiple vendor and systems.
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FX white label providers are keen to stress the flexibility of their offerings as clients increasingly demand à la carte solutions and the ability to add or remove liquidity providers and distribution partners.
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Although processes are in place to limit the impact of rogue algorithms, there are further steps electronic FX trading networks can take to protect themselves from cybercriminal activity.
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FX algo use is steadily rising, according to a report by Greenwich Associates, with the most dramatic rises seen among corporate traders scrambling to demonstrate best execution, as stipulated by the FX global code of conduct.
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From strong and stable to weak and jittery, the pound bore the brunt of the surprise UK general election result, but despite May’s quick move to form a working coalition government, sterling will likely stay soft, say analysts.
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A survey released by index provider Coalition on May 24 revealed the grim state of FX business lines.
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Almost two decades after the principles of machine learning were applied to FX trading, challenges remain to be addressed for the technology to become ubiquitous.
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Competition has become intense in the FX portfolio compression business in recent months, but until now the focus has been on more liquid G10 currencies.
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By allowing clients to create their own pools of credit, Noble Bank International reckons it has developed a service that will significantly reduce counterparty settlement risk for FX trading.
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FX market players are gaining confidence in randomization as concerns over the potential for wider spreads and reduced certainty of execution have been allayed by market experience.
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The newly formed global FX committee will issue guidelines and maintain an index of registers, but they will be run by the private sector.
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New set of 55 principles replaces regional codes with a single blueprint for good conduct in global FX market.
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The top firms this year look like they haven’t moved in 18 years. How can nearly two decades of upheaval appear to have altered the rankings so little in Euromoney’s foreign exchange survey?
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The FX industry has moved on from the fixing scandal and now wants to write its next chapter, underpinned by a new code of conduct. But liquidity remains fragile, volume is down and further challenges lie ahead.
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Euromoney magazine has released the results of its 39th annual foreign exchange ranking, the most comprehensive quantitative and qualitative annual study available on the FX markets.
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The rollercoaster ride for currency-hedged exchange-traded funds (ETFs) shows no sign of slowing, with the up of 2015 and subsequent down of last year followed by increased investor interest in the early months of 2017.
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The non-deliverable forward (NDF) market has been among the fastest growing corners of the FX market, as investors looking for yield increasingly turn their attention to emerging market (EM) currencies. Now, with Pragma’s algo-trading clients joining the party, liquidity could be set to surge even higher.
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Institutional FX and derivatives broker Sucden Financial claims its new OTC FX options service has broken fresh ground in addressing concerns raised by corporates around liquidity, costs and the availability of pricing data.
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Two technology firms say they have pushed the boundaries of trading latency a step closer to the limit with a solution that cuts tick-to-trade latency from 250 nanoseconds to just 120.
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Nine years after FXMarketSpace ceased operations, it appears 2017 will be the year when FX options clearing finally returns to the table – and forwards clearing is also set for a boost.
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Tuesday’s announcement that UK prime minister Theresa May is calling for a snap general election caused a surge in the pound, but can sterling keep the ground it has recovered?
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Prime-of-prime providers reject any suggestion that their existence could undermine the FX industry, but they acknowledge that further investment in pre-trade risk control will be required to maintain customer confidence.
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CLS has responded to calls to expand the scope of its forthcoming netting service, CLSNet, to include less liquid EM currencies. From next year, currency traders will be able to net off trades in more than 140 currencies, regardless of whether they settle on CLS, in a move that is set to enhance liquidity across the FX market.
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Claims of FX derivatives mis-selling have spiked since the EU referendum, although the limited number of court cases brought to date indicates the difficulties faced by companies who feel they were sold products not appropriate for their hedging requirements.
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This year has been a good one for the eurozone economy, with business confidence, credit growth and economic activity set to hit a six-year high in the first quarter.
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Demand for FX algos is on the rise as asset managers seek to take greater control over order execution, according to a JPMorgan survey.
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Global FX trading has fallen between two consecutive triennial surveys for the first time since 2001, according to the BIS, with declines in spot trading accounting for most of that decline – but measured in other ways, FX liquidity remains robust.
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In-house banks offer the prospect of more efficient management of FX exposures for corporations, but putting the necessary infrastructure in place presents a considerable implementation challenge.
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FX buy-siders aren’t convinced of the risk-management potential of stop-loss orders, after many were disappointed with results following big swings in volatility last year.
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Credit Suisse books Brazilian profits and switches to Malaysia; crowded trade hints at heated valuations.
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The Securities and Exchange Commission (SEC) rejected an exchange’s request to list what would have been the first bitcoin exchange-traded fund (ETF), but it might not be long before such a digital currency fund becomes reality, say commentators.
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A recent settlement between Citibank and the South African Competition Commission relating to FX manipulation could portend further lawsuits in several other jurisdictions, including the US and UK, but the prospects for potential claimants rely heavily on the outcome of the European Commission’s own investigation.
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The traditional request-for-quote method of FX trading is far from going the way of the typewriter, even as volatility has boosted activity in all-to-all liquidity providers, whose transparency makes the practice of last look impossible.
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CLS and TriOptima have marked a milestone in the development of the triReduce CLS FX Forward Compression Service by expanding it to allow a greater number of trades to be compressed.
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Conventional wisdom says the UK’s forthcoming exit from the European Union will be bad for the pound, but after a year in which the UK currency has lost a fifth of its value on a trade-weighted basis, there are some in the FX markets who say the worst impacts of Brexit are already priced in.
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The dollar’s multi-year bull run might last a couple more months, but its fundamental underpinnings are weakening.
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Performance analysis solutions, once so pricey only the biggest banks could afford them, are becoming more widely used for FX strategies as regulations demand greater due-diligence processes and sell-siders are under pressure to prove they are giving clients value for money.
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The Financial Conduct Authority’s (FCA) regulatory sandbox has been a hit with market participants and regulators alike, giving firms whose services were never anticipated by existing rules the chance to test out new features without fear of fines or enforcement action.
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After a long period of dormancy, the Canadian dollar appears to have turned a corner in recent trading, as rising oil prices and a booming economy boosted appetite for the currency. But investors tempted to go long the loonie should beware hidden dangers in the Canadian economy, analysts say, including a housing bubble that could be set to burst.
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Although use of mobile devices to place FX orders is growing steadily among retail traders, demand from sell-side institutional traders has stalled because of compliance and functionality restrictions.
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FX market-maker XTX Markets is placing its bets on trade transparency, making a new tool available to the buy side that will, for the first time, enable them to calculate the cost of trades rejected by market-makers.
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The story of convicted Trader A – Tom Hayes – lays bare the actions of a few cliques that masterminded the headline-grabbing Libor scandal, but despite Hayes’ conviction it is still notoriously difficult to pin blame on individual traders even if a firm admits wrongdoing.
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The long-awaited addition of hedging functionality to online trading application MetaTrader 5 (MT5) appears to have convinced at least retail FX customers that, seven years after its launch, it might at last be time to trade up their trading platform.
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The growing popularity of social FX trading has some platform providers worried that inexperienced traders are taking excessive risks through strategies they don’t fully understand.
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One of the US president’s oft-repeated election promises was a tax holiday to encourage US corporations to bring assets held abroad back onshore – if he delivers, the dollar is likely to strengthen considerably against the currencies in which those assets are held, says Nomura.
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Call it what you will – currency war, competitive devaluation, currency manipulation, currency intervention – but central banks are knee-deep in the trenches as they battle to lower their exchange rates and boost their economies.
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The Czech currency came under sustained upward pressure in the middle of January, as investors piled in on bets that faster inflation would spur the central bank to abandon a cap that has kept a lid on the koruna for the past three years.
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Only a week into Trump taking office, it is too early to make concrete predictions about what the FX market can expect, but the acting chairman of the CFTC has outlined some of his priorities, which could provide clues.
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Australian banks are increasing their commitment to electronification, spurred on by aggressive competition from non-bank market makers – particularly for spot FX business.
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The Euromoney FX Survey 2017 is our 39th annual survey of liquidity consumption in the global FX markets.
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On a day many expected would see the pound sink to new depths, the currency instead responded to news that the UK would be leaving the single market by posting its best performance since the referendum – but whether the day marked a turning point or a mere relief rally, nobody can be sure.
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JPMorgan’s decision to adopt a newly launched trade analytics service for its market-leading currencies business highlights the need for independent validation of execution quality in foreign exchange, according to the service’s co-founders.
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A challenging inflation outlook, sluggish economic activity and the steep slide in the value of the lira look set to force the Turkish central bank to oppose the wishes of its president and hike interest rates.
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Corporate use of algorithmic FX trading appears to be bucking the trend of lower overall levels of corporate FX activity.
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Volatile markets, political noise and a culture revamp will be the top themes in foreign exchange for 2017, predict currency experts. Disruptive fintech firms will continue to make headway in a market that is rapidly changing in light of rising pressure on traditional market makers such as banks and demands for greater transparency
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Although the market for FX options has become more competitive, limitations around liquidity, costs and the availability of pricing data continue to deter many corporates.
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The painstakingly gradual loosening of US monetary policy continued this week, with the second rate rise in the cycle coming one year after the first, but the Fed gave markets something to think about by indicating it expects to raise rates three times in 2017.
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2016 will be remembered as the year the people punished politicians at the polls, unleashing a torrent of volatility in financial markets, with currencies taking a huge hit. Here are the biggest currency stories of 2016.
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Many banks are leaning heavily on their single-dealer platforms to improve the efficiency of their FX business, although there is no guarantee that this approach will be sustainable in the long term
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Thomson Reuters has entered a partnership with BestX to provide its buy-side clients with execution cost analysis functionality. It goes beyond what is envisaged in recent regulatory guidance for transaction cost analysis, allowing fund managers to refine their trading activities to reduce costs rather than simply meet compliance requirements
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IMF responds with $12 billion loan approval; banks’ long-term prospects improve.
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After failing to reach agreement at its last two meetings, Opec agreed this week to cut oil output for the first time in eight years. The oil price responded favourably, but lingering doubts about the finer details could mean the impact is short lived.
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While accepting that regulation can help increase consumer and business confidence in cryptocurrencies, providers and industry analysts agree that the BitLicense model is not the way forward for the UK
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Regulatory requirements are driving the development of more sophisticated monitoring software, but FX market participants also have much to gain commercially from ensuring their communications systems are technologically robust.
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Banks and brokers face a tough decision as they struggle to keep up with technology: when to abandon upgrades and take the plunge into a new system. Increasingly, starting again is looking like the easier option.
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The US president-elect has talked tough on China, but he could be good news for China’s economy and its currency.
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UK businesses face a post-Brexit hedging headache, as FX protection purchased before the referendum is now running out for many companies. The cost of renewing it has subsequently sky rocketed.
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Despite struggling to make a mark on corporate FX, non-bank market makers are confident they play a vital role in improving access to liquidity.
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Better hedging seems to have enabled the FX market to shrug off concerns over Donald Trump’s victory in the US presidential elections, with some strong moves in Asian trading giving way to more restraint when European markets opened.
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Regional FX volatility and capital outflows likely to hit LatAm; biggest risk comes from protectionism policies in the medium term.
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Flash crashes are still mercifully rare, but FX bankers worry that changing market dynamics will make them happen more often.
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Broker in a box is promoted as a means of taking the pain out of establishing a regulated FX brokerage, but choosing the wrong approach and/or provider runs the risk of limiting the growth potential of the business from the outset.
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As the US enters the final week of a long and bitter election, and with the High Court throwing the UK’s Brexit plans into doubt, political uncertainty has been the chief driver of the currency markets.
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As FX managed services move towards ever-greater flexibility and ease of access to applications, Euromoney considers the key elements in a managed services offering and how it benefits buy-side and sell-side firms.
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While non-bank providers such as hedge funds and technology companies have taken significant market share in retail FX, they have not got a foothold in corporate FX business.
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Celent has called on central banks to issue their own digital currencies to help raise inflation and reduce systemic risk
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Co-location providers in the FX market are finally seeing better prospects
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Communications compliance is moving up the agenda for financial services firms, as the City's watchdog cracks the supervisory whip and the implementation deadline for MiFID II fast approaches
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Higher margin requirements imposed in the run-up to the Brexit referendum could be a sign of things to come as the FX market digests the impact of reduced leverage
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The renminbi’s inclusion in special drawing rights (SDR) is 'the biggest structural event in FX since the creation of the euro'.
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Regulators might not like them, but many FX brokers view contracts for difference as an opportunity to differentiate their offering in a highly competitive market.
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Peer-to-peer foreign-exchange providers seek to differentiate themselves in a saturated market that has yet to achieve profitability.
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The provider of settlement services for foreign exchange is looking to expand its influence in the FX markets by providing a netting service for payments that is available to institutions that are not CLS members and in currencies it does not settle. By using the distributed ledger, it also hopes to facilitate greater use of this technology.
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Despite a substantial fall in trading volumes in Bahrain during the past three years and the ability of Saudi Arabia to defend its currency peg, increased electronic trading volumes suggest the Middle East FX market has scope for further development.
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The Bank of Japan has unveiled a new strategy in its fight against persistently low inflation amid concerns its QE and negative interest rates regime wasn't working and may even be hurting the economy. Attention now turns to other global central banks to see if they will change course too.
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Transition management firms play a vital role in helping asset managers restructure large portfolios of securities and remove or replace underperforming managers, but past controversies are a reminder to clients they should not assume they are always getting the best deal on FX.
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The market had anticipated the Fed would use its last speech before its September rates decision to prep the ground for a hike, but the audience was instead given a list of reasons for the Bank not to act. The market reaction underlines the diminishing returns of ultra-loose monetary policy.
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The days of using gold for everyday transactions have long since passed, but could the blockchain change that?
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As the China International Payment System (CIPS) approaches its first anniversary, there is much anticipation around how the second phase of the project will impact RMB settlement volumes.
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The FX business is officially shrinking for the first time since 2001, as the world's largest financial market battles an industry slowdown and a regulatory crackdown.
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Artificial intelligence (AI) systems are too expensive to go mainstream for now, but a future in which human currency traders have been marginalized by machines seems closer than ever.
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Regulators around the world have repeatedly tried to tackle the problem of excessive leverage being freely available to retail, particularly in FX, but Belgium's outright ban on leveraged products is the most radical solution yet.
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Passengers have Uber, tourists have Airbnb, now Cobalt DL is beta testing the solution that aims to bring the benefits of the shared economy to FX trade settlement.
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While market talk suggests a number of finance professionals are delaying planned moves to London and some hiring seems to have been put on hold, specialist FX recruiters claim it has largely been business as usual post-Brexit.
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Predicting interest rates is not an Olympic sport, but the job of discerning what the Fed has planned is arguably as taxing as anything Rio is serving up. With economic signals strikingly mixed, and forward guidance offering little additional insight, economists appear to have little conviction in their predictions regarding the Fed's intentions.
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Small corporates and not-for-profit organizations are increasingly looking at peer-to-peer FX as a way to lower costs. Euromoney speaks to four customers who have taken their business away from banks.
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Brexit-related currency volatility is fuelling a rise in foreign-exchange product mis-selling enquiries from businesses that have been burnt on ‘fiendishly complicated’ currency trades.
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The European Securities and Markets Authority’s Market Abuse Regulation (MAR), which came into effect in July, may have effectively brought aspects of spot FX into its scope, argue some advisers. But greater clarity is what market participants need.
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The case against two HSBC employees for front-running a foreign exchange order from a client could hasten the death of the principal model for FICC trading by banks. A shift to an advisory-based approach is possible, but banks will struggle to make up lost revenue.
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When HSBC’s former head of global FX cash trading Mark Johnson learned that he had a window of just over 30 minutes to move the sterling exchange rate and profit from an approaching client trade, he said: “Ohhh f***ing Christmas,” according to US prosecutors.
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The UK's decision to leave the EU has left corporates scrambling to review many aspects of their business to ensure they are able to withstand heightened volatility. Injecting a greater level of optionality into their hedging strategies is one way to protect themselves from increased uncertainty, says Citi.
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Kevin Rodgers, the former head of foreign exchange at Deutsche Bank, has written a book about his 30 years in financial markets that should be read by anyone working in the industry today
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Hedge funds that are trading currency strategies have plenty of money to allocate, but a lack of clear investment themes and an abundance of market shocks are making their lives difficult.
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Recent market moves may have refocused attention on market engagement mechanisms. But there is no consensus on whether circuit breakers are the best solution for managing extreme volatility.
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New UK prime minister Theresa May is busy shaping her administration at 10 Downing Street, but it is events taking place barely two miles away, at the Bank of England on Threadneedle Street, that are exercising the minds of those trying to predict where the pound goes next.
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Corporate clients continue to pay insufficient attention to the factors FX hedge metrics need to be based on.
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Sex discrimination is still rife in the City, but new gender pay reporting rules threaten to expose the gender pay gap at investment banks and compel them to bring real equality to the trading floor.
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In a challenging time for global markets, one firm has shown that a capital-lite, targeted model can not just work but actually gain market share.
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As market activity, to some extent, returns to normal after the immediate post-Brexit plunge, dealers and traders are searching for signs of how clients will behave over the coming weeks and months.
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The BoE still has plenty of monetary weapons in its policy arsenal, including expanding an asset-purchase programme akin to the ECB, but, amid febrile market confidence, it needs to tread carefully.
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The regulatory requirement for better understanding of cost is pushing market participants towards central credit despite the disruption caused by last year’s unexpected Swiss franc appreciation.
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UK-based financial institutions should expect the bulk of European Union regulations to remain in place up to and even after the UK’s exit from the bloc, despite uncertainties over the terms of the eventual exit, lawyers say.
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Paris and other leading European cities will have their work cut out usurping London’s status as the continent’s leading FX centre, even if they succeed in undercutting London’s status as the centre for euro clearing.
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Britain's vote to exit the European Union fired volatility back into currency markets and gave traders opportunities in a number of currency pairs, including minors and exotic currencies as well as the majors.
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How and why trading was dominated by banks and ECNs, with retail investors cautious about getting steamrolled by volatility.
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The market tremors of the game-changing UK vote to leave the European Union will reverberate for years to come across global risk assets, the UK economy, banking stocks and currencies.
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FastMatch’s leak/sweep protection order – designed to address market manipulation fears – has received a cautious welcome, but it’s not clear its benefits will be felt equally by market makers and takers.
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OMSs are extending their influence across the buy and sell side, impacting the efficiency of broker-dealer sales desks and risk-management practices.
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The Swedish krona is ranked as the third weakest currency in a Brexit scenario after sterling and euro, according to analysts.
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The potential for next week’s EU referendum to trigger a sizeable movement in sterling highlights the need for clients to review their use of stop-loss orders as a risk-management mechanism, amid memories of the SNB debacle.
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The European Central Bank (ECB) is likely to quickly challenge London’s status as the eurozone’s largest hub for the clearing of euro-denominated trades if the EU referendum goes against UK membership – but the move, which would be seen as highly political, would be beset with legal challenges.
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The rouble has enjoyed a strong start to the year, shrugging off underlying weakness in the Russian economy, leading the CBR to hike rates by 50 basis points on Friday.
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Euromoney’s FX Survey uncovered sweeping changes in market structure and client behaviour during the past year.
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Market participants have expressed confidence that organized trading facilities (OTFs) – the new venue introduced under Mifid II – will deliver increased transparency compared with multilateral trading facilities (MTFs).
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Curbs on risk-based activities and internalization of client trades are pushing growth in non-bank market making in Asia, but such activity is not without challenges.
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Market participants have expressed confidence that current best-execution rules are sufficient to enable compliance with the updated BIS FX conduct code.
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Despite disparities between individual markets, the growth of electronification across Asian FX markets continues apace.
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Bank FX trading platforms have moved closer to the platform-as-a-service model, although the technology’s market impact has been diluted by operational changes among the largest traders.
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Thomson Reuters has made the first addition to its fixing stable since the acquisition of the WM business. Its new benchmark is intended to pick up business from the European Central Bank, which is redoubling efforts to discourage use of its own reference rates for trading purposes.
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Advocates claim the principles-based approach offers the best hope of restoring trust in the FX market once and for all.
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With the spectre of a 'Leave' vote predominating in the UK EU referendum hanging heavily over FX markets, corporates are likely to further increase their use of forwards as a hedging option.
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Japan could realize its goal of a weaker yen without the need for FX intervention, say analysts.
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Results index More data
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Results index More data Non-financial corporations
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Citi retains top ranking while Deutsche plummets; JPMorgan and UBS rise; top five market share at all-time low; non-bank FX providers make an impact on rankings.
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New Change FX is developing a peer-to-peer matching platform that will enable corporates to net down their portfolios and reduce their need to trade currencies with banks. But is this a stepping stone towards a full P2P FX exchange suitable for corporates, or is such a venue ultimately only of interest to retail traders?
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Turkey has made progress in reducing its debts, while expectations for rate rises in the US have abated in recent months. But political upheaval in the country has led investors to run for cover, and a new and relatively unknown central bank governor faces a dilemma on interest rate policy.
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The sheer volume of risks faced by the FX market is placing pressure on banks to create mitigation strategies to cover a wider range of market challenges, from Brexit to illiquidity.
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Overall investment in FX technology has declined in line with the wider financial services sector over the last 12 to 18 months as banks focus on specific markets and business objectives. But there’s no shortage of innovation in banks’ proprietary or off-the-shelf platforms.
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Changes among the top five • new entrants to the top 10 • new winners in three of the big four client categories • new regional winners • three new entrants to the top 10 trading platform firms
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A small group of top banks has been steadily increasing its dominance of FX trading, but its advantage is so great that within a few years some are predicting all but a handful of banks will have exited the market as liquidity-providing principal players.
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Partially filled orders are nothing new, but discussion of their impact is tied to the debate over the necessity to reform last look.
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Pakistan’s economic reform programme is starting to bear fruit, but a huge appreciation in the real exchange rate during the past two years is hurting the country’s export market, warns the IMF, amid expectations the country will soon join the MSCI emerging markets (EMs) index.
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A group of FX electronic communication networks (ECNs) and market makers are working together to create a central tape for FX, modelled on a similar project for US equities, which they hope will increase transparency and democratize the currencies market, Euromoney can reveal.
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Ex-Citi trader Carly McWilliams’ employment tribunal win will spur on other fired currency traders waiting for their day in court and encourage more women to bring unfair dismissal claims, say legal experts. The banks’ argument that a handful of rogue traders acting behind senior managers’ backs were to blame for the currency rigging scandal is contested.
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Execution management systems (EMSs) are playing a key role in enabling pension funds to lower their FX costs.
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With the Markets in Financial Instruments Directive II (Mifid II) on the horizon, the regulation is likely to impact FX market structure – indirectly.
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Exchanges and the over-the-counter (OTC) market might have moved a little closer in recent years, but it is far from inevitable that demand for greater trading clarity will push a sizeable chunk of the market away from OTC.
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European banking authorities have diluted ‘currency mismatch’ haircut rules in forthcoming non-cleared derivatives legislation – but the bigger issue remains that traders still don’t know if they will have to post collateral on their uncleared FX derivative trades.
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Trading within the five-minute window of the WM 4pm fix has become predictable due to the widespread use of algorithms among banks and buy-side institutions, according to research published by Pragma.
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The US dollar’s inexorable rally has juddered to a halt this year as it slides versus all but one of the world’s major currencies. Most analysts are sceptical of a strong return and Wednesday’s FOMC minutes only confirmed the US Federal Reserve’s caution.
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Thomson Reuters has acquired the WM benchmarks business in a move that makes it arguably the single most-important institution in the global benchmarks industry. It has no plans to change the offering for now, but some wonder whether it could begin a period of change in the broader business, with new providers competing on calculation methodology.
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Acting for now as a secure exchange between conventional and cryptocurrencies such as bitcoin, Stockholm-based Safello is developing what it sees as a ground-breaking transaction browser.
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The emergence of new trading venues marks a notable advance in the development of cryptocurrencies, such as Bitcoin, although exchanges vary in their product offerings.
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TriOptima has called on banks to do more to create currency hubs in their trading books, allowing for greater efficiency in managing their balance sheets.
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China has reportedly drafted a Tobin tax on foreign currency transactions – just the latest in a series of measures that appears to backpedal on financial reform. However, bulls say it’s a classic move by Beijing to limp towards reform without subjecting domestic markets to volatility.
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Foreign-exchange professionals are feeling the brunt of banks’ deep cuts to sales and trading desks, but don’t get disheartened: the shake-up of the industry offers exciting new opportunities.
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Revelations of benchmark fixing and manipulation appear to have created a more favourable environment for FX industry participants to highlight suspected wrongdoing but the data tell a different story in the UK.
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Demand for currency hedged exchange-traded funds (ETFs) is expected to remain strong this year thanks to FX volatility, but year-on-year growth pins on the dollar.
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Gavin Wells, the pioneer of LCH.Clearnet’s ForexClear offering, and his right-hand man Basu Choudhury have stepped down amid talk of a fall-out with the clearing house over returns, bringing into question the future direction of ForexClear.
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China is well on the way to creating a global currency, with a little help from the IMF. But what of India, the other economy set to dominate the 21st century? Will the rupee come to rival the renminbi and the dollar, or will poor planning and weak infrastructure undermine its ambitions?
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Law firms might be licking their lips at the prospect of fat FX settlements in Europe, but the ongoing European Commission investigation and lack of clarity around the UK’s new regime for competition litigation make it difficult to predict their strategy – or their chances of success.
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Weaknesses in Japan and Asia will mean a flight to quality.
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Regulators and policymakers recognise the need to understand changes in liquidity but need better market intelligence, AFME conference hears.
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Certification could be withdrawn if participants do not abide by the global code of conduct, according to FCA’s Schooling Latter.
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The announcement of the referendum date of June 23 on UK membership of the European Union (EU) sent an already-weakening pound into a tailspin, which saw it testing multi-decade lows, but traders are divided on whether sterling has bottomed out as Brexit fears jump.
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With rates near their lower-bound or hovering in negative territory around the developed world, the opportunity cost of investing in gold – which critics decry for lacking a regular income stream – has essentially vanished. Unless the fear continues to rage, the commodity’s recent spell should run out of steam as US rates creep up.
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Thanks to tighter capital requirements and a jump in corporate issuance, the relationship between US interest rate swaps and underlying treasuries is firmly in negative territory. Get used to it.
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All the hard work of Abenomics has been undermined by weeks of frantic trading that has seen the yen appreciate dramatically on safe-haven flows, with QE and even an announcement on negative rates having little impact. The market is now waiting to see if the Bank of Japan has any more tricks up its sleeve.
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The global FX code of conduct being developed by the FXWG under the auspices of the Bank for International Settlements has moved a step closer to becoming a reality, with a first draft being released to market participants for feedback.
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Corporate treasurers are turning to dynamic hedging strategies in a bid to counteract extreme volatility in emerging market (EM) currencies, which can be notoriously tricky to hedge and even put a company’s credit rating in jeopardy.
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A lack of clarity around the definitions of principal and agency trading, and the evolution of the grey area of the hybrid could give rise to further foreign-exchange scandals if the issue is unresolved. Markets and regulators are pro-actively putting these FX trading practices under the microscope.
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It has been nearly 18 months since ParFX launched its Prime service, which enabled the prime broker banks among its clients to offer liquidity to their buy-side clients. Now it is looking to expand that to the PoP space, casting a wider net and bringing smaller funds into the fold, Euromoney can reveal.
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FXCM has compiled a study that, perhaps unsurprisingly, finds it offers better prices on execution than what is available to institutional clients on the big three FX trading platforms. The regulatory push away from OTC trading and towards exchanges is fundamentally misguided, the online broker concludes.
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The Bank of England (BoE) has recast the terms of reference and membership of a key foreign-exchange industry committee to take account of the growing diversity of the forex market in the UK and the central role that will be played by the new global code of conduct.
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Gap between onshore and offshore exposed; Hong Kong dim sum market in doubt.
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Iran is emerging from the shadows to re-establish itself as a prime player in the Middle East. Moves are afoot to rid the country of its black-market exchange rate and develop a working currency forward market.
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For many prime brokers, 2015 was a chastening year amid rising macro risks, capital charges and innovation paving the way for a new breed of providers – but the traditional bank providers and the new entrants insist they target a different client base.
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The past 12 months have seen fees rise in FX prime brokerage, with many admitting there is probably more to come this year – but it has not all been bad news for clients, with the business benefiting from innovation, with technology, and particularly risk-management systems, an increasing priority among providers.
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The January fall in emerging market currencies, the exodus of foreign capital and a global bear market in equities all point to a new financial crisis. How China reacts to this threat holds the key for emerging markets.
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Businesses will need to closely manage their exposures to currencies this year to avert losses, as notable exchange-rate moves this month are already threatening to eat into profits, warn foreign-exchange experts.
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Trading bets against the Saudi peg have jumped since the collapse in oil prices, despite the Kingdom’s sizeable FX reserves cushion.
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FX sales teams are now more restricted in how much market colour they can provide to clients, challenging the relationship-driven industry.
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CLS, the systemically important FX settlement system, has a number of plans in the pipeline, including an initiative with LCH.Clearnet and a settlement system for currencies outside its proprietary system.
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This year will be driven by persistent volatility, a dollar rally, dealer intermediation and compliance fears.
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While irked by western dominance of Swift and determined to assert its monetary independence, the prospect of Russia going it alone on payments and messaging remains remote.
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Some 14 months after it was created, FXPA – the latest organization to put itself forward as the voice of the FX industry – is confident it is setting policymakers on the path to better market regulation.
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Use of execution management systems continues to increase as markets become more fragmented.
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FX monitoring and surveillance solutions have been beefed up since the fixing scandal broke, but inconsistencies persist in the way in which they are applied and, more generally, new systems lack a harmonized and automated approach.
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A new range of foreign-exchange service providers and P2P fintech disruptors are coming to the aid of international charities, to help them get the most bang for their buck when donating money abroad and potentially save millions.
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As if to prove the adage that ‘it’s an ill wind that blows nobody any good’, it appears January’s Swiss franc turmoil has had a positive impact on electronic price formation.
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Progress has been made towards lowering post-trade costs in FX markets, but it is clear no single initiative has the ability to effect notable change.
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Two years ago, a leading consultancy firm suggested all-to-all trading would become the norm by 2017. While progress has been made, it appears unlikely it will become the dominant FX model in little more than 12 months’ time.
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Chastened by the 2012 volatility, Reserve Bank of India officials strike a cautious note about the virtues of rupee internationalization, as efforts to launch several offshore rupee bond issues gather pace. Market participants warn that liquidity and exchange-rate risk looms large on attempts to push greater usage of the currency abroad.
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Leading women in FX talk about breaking the glass ceiling as the latest scandals reinforce the macho stereotype of the industry. Could the rise of electronic trading influence gender dynamics?
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Dollar dominance continues; RMB inclusion in IMF reserve basket symbolic.
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Leading P2P providers are confident their FX products can rival leading banks, but tech bulls concede the shifting FX market-structure landscape will still see the top-tier financial institutions dominate.
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The New York Attorney General’s decision to investigate the posting of false bids and offers in the FX options market for emerging-market currencies is further evidence of increasing regulatory interest in spoofing – if not yet clear evidence of a sustained crackdown on the practice.
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The $150 million fine imposed on Barclays this week for abusing its last-look policy on clients' currency orders until as recently as three months ago signals another nail in the coffin for the controversial practice, say analysts.
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The new trading platform for emerging-market currencies is now live with the Indian rupee, Brazilian real, Chilean peso and Colombian peso.
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The euro has emerged as a funding currency, and traditional euro/dollar safe-haven dynamics have broken down.
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Interoperability rather than exclusivity appears to be the likely path to success for corporate blockchain services.
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The Trans-Pacific Partnership (TPP) has been criticised in the US for ignoring the question of currency manipulation. The US Treasury hoped it could appease those concerns with a joint declaration by the countries involved, pledging to avoid such practices – but critics look far from convinced.
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Randomization continues to divide opinion, with proponents’ claims of reduced latency arbitrage set against concerns over reduced certainty of execution and wider spreads.
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One month in and it’s a case of so far so good for the China International Payment System (CIPS), even allowing for limitations in operating hours.
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Having done well from their exposure to the RMB during the past decade, the currency’s surprise devaluation in mid-August should force Chinese companies to brush up on hedging strategies that were rusty at best, but many are instead simply focusing on opportunistic borrowing strategies.
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The AKP’s surprise victory last weekend added momentum to a lira relief rally that had begun in the run-up to the election, with some investors punting a strong government will kick-start reforms stalled since Turkey’s last election in June – but the rally is likely to prove short lived unless PM Davutoglu makes reputable appointments in key economic posts.
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Companies that use over-the-counter (OTC) derivatives to manage foreign-currency earnings exchange-rate risk will have taken note of recent pro-active developments on market reform in Asia and Africa. The next step – mandatory clearing in Asia – will trigger a wave of margin compression and shifts in market infrastructure.
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China's quarter-point rate cut last Friday is the latest attempt to revive a flagging economy. But although currency liberalization is on the agenda in the longer term, the People's Bank of China is unlikely to be ready to cede control of the renminbi’s de facto dollar peg just yet as depreciation pressures grow.
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Regulators have cited portfolio compression as one way market participants can reduce risk in their trading. TriOptima has long provided the service for other asset classes, but until now it has not been available for FX swaps and futures.
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Bitcoin is riding high after a recent European Court of Justice ruling that users in Europe are not liable to pay value-added tax when trading the cryptocurrency. But regulators worldwide are divided on whether it is a commodity or a currency and are still probing the advent of bitcoin derivatives as exchanges flourish to satisfy traders' demand for a wider range of products.
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Growing use of Islamic finance places greater importance on the ability of corporates to access hedging solutions that are complaint with Shariah principles.
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Foreign-exchange market participants are warming to the idea of exchange-like trading and abolishing outdated market practices such as last look – but banks and non-bank players still cannot agree on the future landscape of FX, according to a survey published by LMAX Exchange.
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Establishing an industry-wide netting utility to handle fix execution is likely to prove challenging, even with the support of the organization mandated to promote financial stability.
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‘Probably no more than a dozen’ likely to become principal market makers.
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Having moved to fill the gap left by departing FX prime brokers, prime-of-prime (PoP) providers are set to capitalize on increased interest in pre-trade risk management.
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Commodity exports overvalued the real; manufacturing went 'down the drain'.
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The FX platforms that have emerged this decade acknowledge that remaining competitive means doing more than simply offering lower commission rates.
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Agency desk execution has been described as the way forward for banks looking to reduce costs and retain clients, but it is far from clear as to whether most institutions will go down this road.
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The Financial Stability Board (FSB) has issued a progress report for the reform of the FX benchmarks business, expressing satisfaction with the overall progress the industry has made – but it called for a greater role for smaller benchmarks other than WM, while suggesting smaller banks are also lagging their larger peers.
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View the results of 27,000 survey responses from treasury professionals.
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. Best regional cash manager
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Banks in Poland and Croatia will only have themselves to blame if they end up footing the bill to resolve the Swiss franc mortgage problem.
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Offshore renminbi has passed another milestone, becoming the first non-CLS settled currency to be tradeable on ParFX – but China’s regime of exchange-rate controls still casts a long shadow over the market’s infrastructure.
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Mis-selling of derivatives is fast becoming a hot topic in foreign exchange, as industry players come under pressure from businesses, regulators and the press to be transparent on price and product. Concerned market participants are urging the City watchdog to investigate forex mis-selling and, in the meantime, are educating businesses on how to avoid sales sharks and dodgy derivatives.
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View results from Euromoney's 15th annual cash management survey, the global industry benchmark for banks providing international, regional and local cash management services to non-financial and financial institutions.
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Saxo Bank has thrown open its doors to third-party institutions and developers to use its trading infrastructure with the launch of OpenAPI, bringing multi-asset trading capabilities to institutional and retail traders. It hopes the move will encourage a new generation of apps and services, harnessing the innovative spirit of a new wave of fintech companies.
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Proponents of central limit order book (CLOB) point to its ability to deliver liquidity at times of extreme market stress, but they have yet to convince the majority of market participants that the price is worth paying.
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The drive away from the dollar and towards meaningful use of the kwanza could make Angola’s poor even more vulnerable.
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Emerging markets are working for a multipolar monetary world. Beijing is spearheading the push to establish rivals to the World Bank to globalize the renminbi, establish markets for its excess capacity and plug the infrastructure deficit. But, for now, a post-Bretton Woods era is fantasy.
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The importance of foreign exchange is fast rising on the buy-side agenda, as asset managers start to question how good a deal they get on their currency trades in light of the benchmark reform after the fix scandal, according to market participants at this year's TradeTech FX conference.
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Clients are demanding better price transparency, regulators are sniffing around common trading practices, and markets are bracing for further Asia-driven volatility, say foreign-exchange professionals at this year’s TradeTech FX conference.
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Volatility is back with a bang as traders seek to make sense of an uncertain global macroeconomic outlook. Fund managers lay out trading strategies drawing from CHF and CNY lessons, and one fears Japan and China are now in similar situations to Switzerland.
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Market propped up by $200 billion in July and August; brokerage probes undermine drive to reform.
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Chief executive admits concerns; equity trading planned for 2016.
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$5.8 billion bill for loan conversion; portfolios ‘impossible to price’, say analysts.
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As the regulatory landscape for FX continues to evolve – including shifts in best-execution practice and new supervisory frameworks for a slew of products – investment managers have been left uncertain about the implications for some of their trades.
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Battle-ready long-term investors could pick up equity and debt on the cheap, according to research, as S&P finally cuts Brazil to junk after Euromoney Country Risk rankings.
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Regulators might be suspicious of it, but even market participants who have shifted their stance on last look reckon clients should be allowed to make up their own minds.
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Tighter dollar liquidity will be bad news for emerging market banks and their lending boom of recent years is about to grind to a halt.
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The Bank of Japan (BoJ) has worked hard to weaken its currency in recent months and had achieved some considerable success with its quantitative easing (QE) programme, with yen levels at their weakest against the dollar for more than a decade. The global panic after China’s devaluation of the renminbi saw the yen quickly bounce back, but authorities are unlikely to give up.
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With the recent upheaval in emerging markets (EMs) heightening the importance of hedging strategies, treasury management systems (TMS) providers look set to cash in.
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Euromoney Country RiskAbenomics had been designed to rescue Japan from its awful deflationary torpor, but the economy is struggling again and its troubles could become a lot worse if China buckles.
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Emerging market (EM) FX is convulsing amid deflationary fears in China – the engine of EM growth – with the crash in its equity market illustrating the loss of control of its authorities. Meanwhile, the US inches closer to raising rates, while there is a risk of a technical blow-up among EM market-makers.
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China’s economic downward spiral and weakening renminbi has dragged down neighbouring countries’ currencies and burnt investor appetite for emerging markets (EMs), but as currencies hit record lows and approach fair value, some market participants smell a ‘buying opportunity’.
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China’s shock RMB devaluation is unlikely to influence the Federal Reserve’s decision to hike, or otherwise, in September, but it could shape the path of subsequent increases, say analysts.
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Analysts foresee a surge in corporate FX hedging activity, onshore and offshore RMB spreads to normalize, and a dip in dim sum issuance after the RMB’s shock adjustment.
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The jury is out on whether the rise of tech-savvy non-banks means FX banks should adopt either a full service, market champion model or a simplified, limited service provider model, or something in between.
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Everyone knew a revaluation of renminbi was coming sooner or later, yet China's announcement, including reform of the dollar fixing mechanism, caught many off guard. The move left observers debating whether it was stimulating its economy or acquiescing to calls for exchange-rate liberalization.
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Areas of the FX market where outsourced or cloud solutions have the potential to exert a greater impact include platforms that electronify the workflows associated with FX options trading, although bank conservatism is likely to prolong the lifespan of in-house solutions.
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While substantial investment has been made in FX technology since the global financial crisis, there are areas of the market where its impact has yet to be felt.
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Fuelled by regional treasury centres, electronification of FX is gathering pace in Asia.
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FX traders have happily reported an increase in volatility during the past year, driven by the onset of divergent G7 central bank policies, after several years of relative abeyance. Though volatilities have softened in recent summer months, US rate rises from September could re-trigger turbulence.
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Brokers and even the likes of Western Union are finding success in selling complex foreign-exchange options to small to medium-sized enterprises (SMEs) as banks retreat from servicing their smaller customers, but industry figures warn of a new ‘Wild West’ and the need for robust compliance standards.
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Demand for single-dealer platforms continues to drive adoption of platform-as-a-service (PaaS) in the FX space, allowing smaller players to compete with the top-tier firms in pre- and post-trade services.
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P2P FX is rapidly gaining traction in the retail space, but even providers acknowledge it will take time to achieve significant volumes at the upper end of the corporate market.
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Structural problems and over-leverage mean the focus will switch to Asia for the next global currency moves.
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While the central bank has ruled out further currency devaluation, markets continue to price in a weaker naira and the prospect of weak foreign capital inflows.
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FX managers see growth in active currency hedging and alpha-generating FX funds in the years ahead.
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Providers of FX transaction cost analysis (TCA) are proof ‘it’s an ill wind that blows nobody any good’, as they aggressively promote their services to institutional clients after fixing scandals.
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CLS, the provider of settlement services for FX, is inching closer to bringing the Hungarian forint into the fold of currencies it settles. This is just one of a catalogue of projects the group is working on, as it extends its settlement reach further across the FX world.
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The benefits of in-house banks are evident to companies with businesses in multiple countries and substantial FX exposure, although implementation challenges can be considerable.
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In addition to facilitating more efficient payments, corporate cards can also help treasurers reduce their FX costs.
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China’s bid to join the currencies in the IMF’s SDR basket is more than a footnote of interest only to economists. Policymakers should take note.
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Renminbi internationalization a big opportunity; commodities counterbalance bank retreat.
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Six months have passed since the Swiss National Bank (SNB) scrapped its EUR/CHF 1.20 floor on January 15, unleashing a torrent of volatility and burning traders across the globe. What lessons should we remember from one of the craziest days in currency markets?
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US firms named best bank and best investment bank; Hourican takes banker of the year award; ICBC’s Jiang rewarded for outstanding contribution to global financial services.
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Euromoney can reveal more details emerge about IG’s alleged failures to deliver best-execution practice on Black Thursday.
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Banks cannot afford to ignore the potential value of using insights from data analytics to personalize their FX services.
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In the absence of an industry-wide consensus on faster settlement, availability of real-time FX conversion is likely to remain patchy – challenging the growth of immediate payments in corporate banking.
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A number of extreme market events in recent months, combined with ultra-loose monetary policy by the world’s leading central banks, have changed the relationships between many asset classes, including the euro, Swiss franc, yen and sterling.
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Lawyers and hedging consultants are reporting a rise in mis-selling accusations from companies in the travel and leisure sector, over complex currency derivatives sold to them by their banks and brokers. These cases are in their infancy, but are predicted to rise as the mis-selling scandal broadens from interest-rate hedging products to forex products.
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Market volatility has impacted FX risk-management processes, although differing approaches to technology investment means the effect on market participants has been uneven.
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Inertia around the mandating of FX activity on swap execution facilities (SEFs) by the Commodity Futures Trading Commission (CFTC) continues to favour Europe as a trading location.
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After years of modest growth, currency hedged exchange-traded funds (ETFs) are capitalizing on the travails of the euro and yen.
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The widespread practice of internalisation in foreign exchange has officially come under fire from regulators for a lack of transparency and is fast losing its shine, but it remains crucial to the smooth running of the world’s largest market.
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While hedge funds increase their use of algorithms, corporates continue to execute only modest volumes.
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A review of EMIR reporting is under way as the industry lobbies regulators to move to single-sided reporting for OTC derivatives and remove the reporting requirement for exchange-traded derivatives. What’s more, cross-border harmonization of derivatives regulation is way off.
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A series of market disasters in recent years, culminating in the SNB’s decision to abandon its peg to the euro, have forced banks to reconsider their commitment to the prime brokerage (PB) business, leaving many smaller hedge funds and other clients in the cold – but a new generation of providers is taking their place, promising to revolutionize the business.
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As the Bank of England (BoE) prepares to publish its final report on fair and effective FICC markets on Wednesday, a senior official acknowledges there is little support to extend exchange trading beyond what is mandated by the G20.
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The number of renminbi trading hubs is growing fast. More sovereign names are set to enter the issuance market, and bankers expect another banner year in RMB debt volumes. This year the currency could be added to the IMF’s Special Drawing Rights basket, while the Hong Kong/Shanghai Stock Connect initiative is now up and running. China’s leaders believe further opening of the capital account while boosting the flow of RMB in global trade is vital to the country’s long-term economic performance and credibility.
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Banks are making steady progress in cleaning up their foreign-exchange businesses in the wake of regulatory investigations into rigging currency markets, according to the chair of the Financial Stability Board’s (FSB) FX benchmarks group Guy Debelle.
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Opportunity for banks same as in FX; Goldman investment ‘a positive signal’
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Recent currency movements have highlighted the limitations of the forward as a hedging option for emerging market (EM) currencies.
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A lack of attractive investment opportunities in pure currency hedge funds means investors looking for FX exposure might be forced to invest elsewhere.
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Opinion is divided on the extent to which private-bank clients should be encouraged to consider FX as an asset class and to look at strategies to generate returns from currency volatility. In any case, most private-bank clients are dollar bulls.
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Benchmark fixing and manipulation has created the potential for a large volume of FX-related litigation, but the claims process is both arduous and expensive.
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Recent data suggest that the momentum of the renminbi is slowing, particularly outside Asia.
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The $5.6 billion of fines handed out to six leading foreign exchange banks will not be the end of the crisis afflicting FX, but it might be the beginning of the end. The people at the top of the industry are starting to think more deeply about what will drive success in the FX markets of the future. How can foreign exchange rebuild its zest, and its reputation?
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Non-financial corporations 2015 Results index Euromoney says:
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Results index Overall high frequency trading firms' rank Source: Euromoney FX Survey
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Overall market share 2015 Results index Euromoney says: Citi retains its overall title with a remarkably consistent market share of 16.11% compared to 16.04% last year. This is despite upheavals in its management team, and the departure of a number of traders around the FX investigation.
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The headline results of Euromoney's 2015 foreign exchange survey show the leading banks have been remarkably consistent, despite the upheavals in the sector. But, beneath the surface there are changes that will transform the competitive landscape of the industry. Deeper analysis of the survey results demonstrates that’s already starting to happen.
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Real money 2015 Results index Euromoney comments:
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Results index The Euromoney FX Survey 2015 is the 37th annual survey of liquidity consumption within the global FX markets conducted by Euromoney magazine. Respondents were contacted by Euromoney from January 22nd to April 3rd 2015 with responses either collected via telephone or electronically at www.euromoney.com/fx2015. In total, Euromoney received 3,794 valid responses from consumers of FX liquidity representing total FX consumption of $123.6 trillion in calendar year 2014. The survey is split into two parts:
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Asian regional market share Results index Euromoney says:
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Citi retains top spot in Global FX as clients execute more than half electronically for the first time
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View full results from Euromoney's 37th annual survey of liquidity consumption within the global FX markets.
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Fintech start up aims to spot market rigging, using clues in how traders talk, not what they say
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Barclays has suffered the biggest blow in the latest round of billion-dollar regulatory fines for rigging currency markets, with a penalty of almost $2.4 billion from five regulators, with the spotlight shifting to FX options.
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Any hopes the $5.7 billion settlement between the leading FX banks and US authorities will finally put the FX fixing scandal to bed are likely to prove misplaced.
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Companies’ financial results have revealed the impact of unprecedented currency volatility on revenues and is a running theme this year, say analysts, emphasizing the need for a flexible hedging policy.
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A rising dollar, a falling euro, a vulnerable Chinese currency and critical elections are just some of the reasons why experts predict heightened emerging-market (EM) currency volatility in 2015.
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The Bank for International Settlements (BIS) has formed a new FX working group to settle the problem of conflicting codes of conduct for FX market practitioners, promising to draw the best from all six existing codes to create a single document that will be universally applicable.
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The recent strength of the Australian dollar has continued unabated since April, despite dovish statements from the Reserve Bank of Australia (RBA) and a second cut in a row on May 5, bringing the cash rate down to a record 2%.
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Saxo Bank has consolidated its disparate trading systems onto single platform SaxoTraderGO in a bid to modernize the look and feel. Saxo hopes it will secure the allegiance of a footloose trader community, allowing clients to monitor their positions on the move and execute orders while serving up dinner.
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The rouble’s crash sent currencies tumbling across the Caucasus and Central Asia. Banks look relatively well placed to withstand an inevitable downturn. But with protracted stagnation looming, is it time for policymakers to build bridges further afield?
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Hedging experts share their advice on how to find the most suitable product and negotiate the best possible price, and what to do if your hedges go pear-shaped.
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As the race to reach an agreement on Greek reforms and the latest instalment on the European aid package enters its final weeks, prime minister Alexis Tsipras looks set to make the necessary concessions to secure European assistance.
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So far in 2015 we have been witnessing death by a thousand policy rate cuts around the world. That is turning the US Federal Reserve’s dream of rate normalization into a dystopian nightmare.
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Mis-selling cases of foreign-exchange hedging products are on the rise with claimants inspired by the success of interest-rate swap mis-selling claims. Moreover, sharp volatility in currency markets has hit some businesses' hedges hard, leading them to question the suitability of FX products sold to them by their banks.
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The number of EU countries with real-time payment systems continues to rise, but prospects for systems that work across borders remain uncertain outside Europe, though block-chain technology could offer one solution.
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The Swiss National Bank (SNB) has expanded the scope of its negative rates policy, meaning more assets deposited at the central bank will incur charges – but more must be done to substantially weaken the currency, say analysts.
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The internationalization of the renminbi could be further turbo-charged if knowledge and liquidity concerns were addressed, according to a new study on corporates' views of the Chinese currency.
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FX broker FXCM has unveiled its plans to sell its non-core assets to repay loans post-Swiss National Bank disaster, and focus its resources on wholesale as well as prime of prime services.
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A husband-and-wife business pursuing a negligence claim against RBS for product mis-selling is taking its fight to the Court of Appeal, in a gripping case that could open the floodgates for more mis-selling claims. It could even bring into question basic terms and conditions of standard banking contracts across all asset classes.
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While EU regulators debate the merits of introducing a leverage cap, one online broker offering extreme levels of leverage makes a case for the defence.
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Non-deliverable forwards (NDFs) have experienced impressive growth in recent years, providing a solution to the problem of trading spot FX in many emerging markets (EMs) where currencies are not deliverable. Regulatory and liquidity concerns, combined with competing FX products, have moderated buy-side enthusiasm.
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The Canadian dollar typically trades in the shadow of the all-powerful US currency, but last month that momentarily changed as global interest in the ‘loonie’ soared to intergalactic highs.
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The UK has entered election mode, with concerns about the country’s political future dominating trading in sterling. Volatility is rising and investors are seeking protection in the options market.
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Facebook’s arrival on the digital payment scene will inevitably see it become a significant player. But, so far, Facebook is not offering a revolution in the global payment infrastructure and tie-ups with disruptive new technologies would truly transform the FX landscape.
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The meteoric rise of the US dollar seems unstoppable but cynics are beginning to emerge, as economic data and relative valuations suggest the currency’s ascent is starting to look overheated.
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Falling real creates value; upturn predicted for 2016.
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The internet responds to the crunch facing FX trading platforms post-SNB.
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The convulsions after the SNB’s decision to cease pegging the Swiss franc to the euro are still being felt, with regulators in Europe and Australia debating the merits of tougher controls on leverage in FX markets for retail investors.
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FX platform Hotspot will launch a European matching engine later this year, after its acquisition by Bats Global Markets.
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Foreign-exchange broker FXCM’s CEO calls for wider adoption of circuit breakers on FX platforms to prevent another Swiss franc shocker as seen on Black Thursday, but critics question whether it is the right solution and even suitable for an over-the-counter (OTC) market such as FX.
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In its fair and effective markets review, the Bank of England has acknowledged end-users are largely ill-suited to the task of combating market misconduct in FICC markets. But opinion remains deeply divided over how best to strengthen oversight in wholesale markets, and which regulatory body should lead the charge.
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Volume on anonymous platform EBS Market has increased during recent volatility, while disclosed EBS Direct continues to gain traction in Commonwealth currencies.
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Bank-backed spot FX trading platform is seeing increased participation from buy-side firms, but further growth is still top of its agenda.
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Investors forced out along the curve; issuers play currency and duration game.
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As China gradually loosens its grip on its FX regime, an ostensibly overvalued RMB is expected to fall back in line with global currencies, presenting a range of opportunities for traders, ranging from USD/CNH spot positions and the options market, to punts on the CNY-CNH differential.
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China’s currency might look overvalued, but that is only half the story.
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Volatile currency markets in 2015 threaten to erode international investors' portfolio returns on traditional equities and bonds, highlighting the need for a strong hedging strategy, advise market participants.
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International investors are increasingly looking at Latin America’s local currency markets, but foreign exchange volatility makes the buyside wary of losing any potential gains, as has happened with some recent deals. The mixture of currency and credit risk may be too heady a cocktail for some.
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FX volatility highlights the need for corporates to stick to long-term hedging programmes, so that they can protect profits and their credit ratings. Some firms are also positioning themselves for opportunistic trades and upgrading their treasury and FX management systems.
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After the events of Black Thursday, the CEO of crest-fallen FXCM, the FX broker, discusses the shake-up in its business model, the future for retail flows, and lashes out at the institutional FX market structure.
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The need of banks to raise awareness and staffing levels around the renminbi within their own organizations looks set to be key as the battle for business heats up.
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For corporate treasurers, currency volatility is heightening the importance of updating FX hedging policies, amid rising costs.
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International banking alliances offer a number of benefits to treasurers – from FX hedging to cash pooling – while Sepa and the rise of non-bank payment providers have yet to diminish their allure.
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What goes up must come down, even the renminbi. Having appreciated by more than 30% since 2008 against a trade-weighted basket, there is growing consensus that 2015 will see further falls in the Chinese currency.
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Euromoney Country RiskThe sovereign’s risk score is sliding again, raising doubts over its safety.
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After the shock removal of the Swiss peg to the euro, speculators are testing the DKK peg, though, for now, the central bank is well-placed to withstand the pressure.
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How did the relationship of the Swiss franc and the euro turn out to be purely platonic? Conscious uncoupling was perhaps inevitable.
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The eurozone’s economic fortunes should start to recover with the arrival, at last, of full-blown quantitative easing. As the world’s leading currencies are set for a race to the bottom, it could be time to buy gold.
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The 2015 survey launched Thursday 15th January and closed Friday 3rd April.
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Russia has been caught in the eye of a perfect storm. Battered by falling oil prices, US and EU sanctions and a dramatic market correction as the rouble was allowed to float, the currency has been in free-fall and liquidity has largely evaporated, with many brokers ceasing rouble trading altogether.
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Despite the strengthening dollar and lower oil prices, tactical opportunities in emerging market (EM) foreign exchange abound. The choice of funding currency will be crucial in driving returns in the asset class, say investors.
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The SNB's removal of its currency floor with the euro and a rising greenback call into question the strength and wisdom of currency pegs elsewhere, especially in the Gulf and Hong Kong.
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Despite its extension to FX last year, market participants acknowledge it is likely to be some time before they feel the full impact of the liquidity-enhancing trading enablement standardization initiative (TESI).
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The retail FX market is ripe for further consolidation as brokers that successfully navigated the volatility of the Swiss franc cap prepare to swoop on strugglers that took a hit, says the CEO of US forex broker Gain Capital.
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Opinion is divided on how automation of trade-finance processes is changing bank practices in relation to FX reporting and processing.
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The Hong Kong dollar’s peg to the US dollar has, once again, come under scrutiny after the Swiss National Bank’s (SNB) removal of its currency’s floor roiled currency markets globally.
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The shock decision by the Swiss National Bank (SNB) to discontinue its euro peg and impose a 0.75% rate on sight deposit accounts will inevitably wreak havoc on Swiss banks’ earnings, say analysts, citing the rising CHF-denominated cost base of global investment banks, which derive the bulk of their income in USD and EUR.
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Foreign-exchange markets have been hit by bouts of extreme volatility this year, prompting investment managers to hastily rebalance their portfolios, but it also signals a welcome return for traders seeking to maximize gains from moving currency markets.
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The US has been recording mixed data signals in recent months, with strong GDP undermined by weak wage growth and core inflation.
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The SNB has been under sustained fire in its attempt to defend its euro peg in recent years, as ECB loosening and risk aversion increased safe-haven flows. Thursday's rate cuts and the shift in the long-defended policy regime have shocked markets and have far-reaching implications for the euro and eastern Europe.
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JPMorgan’s $100 million settlement of a currency manipulation lawsuit has sparked a flood of interest from potential new claimants, and marks a new victory in their fight for compensation, according to a leading lawyer involved in negotiations.
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The yen has been quietly strengthening in recent days, amid renewed concerns about global demand pushing down the price of oil and fresh fears over Europe. If this trend persists, it could be problematic for Japanese prime minister Shinzo Abe, who is closely associated with a policy of yen weakness.
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Negative publicity around cryptocurrencies such as Bitcoin has deflected attention from the potential of the underlying technology to facilitate real-time – and therefore much cheaper – international payments.
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Concerns that Greece could be on the verge of leaving the euro are back to the fore after the country called elections that could usher in a government determined to rip up the existing aid agreement – but analysts doubt the brinkmanship will lead to Greece leaving the single currency, let alone a full-scale euro break-up.
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Foreign-exchange options traders are feeling the pressure as regulators shine a spotlight on the derivatives market and investigate commonplace practices, such as barrier running, which traders fear might attract criticism.
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It has been a year of two halves for FX, with an opening seven months characterized by low volatility and few attractive trading opportunities for FX managers, before a dollar bull market roared into life in August. It is arguably the first such market for 20 years, bringing with it a rise in volatility and enhanced opportunities for FX traders.
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Weak global trade and increasing import substitution have signalled bad news for emerging-market FX in 2014, particularly in those countries that rely on a vibrant export sector to drive their economies. 2015 should provide some respite for manufacturers, but commodity exporters will remain in the line of fire.
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Investment in FX technology is expected to mirror growth in wider financial services IT expenditure over the next few years.
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EM currencies have taken a savage beating this year, tumbling to a decade low, thanks to falling oil prices, weaker growth, a stronger dollar and fears over reform inertia. Euromoney surveys the FX landscape for 2015.
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Banks face a tough task proving to regulators that foreign-exchange traders are not front-running clients, as they respond to the government’s consultation on reinforcing confidence in the fairness and effectiveness of fixed-income, currency and commodities markets (FICC).
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Companies are recognizing the benefits of applying the principles of Sepa to payment and collection processes beyond the single euro payments area, helping to boost liquidity and cross-border flows, consolidate treasury processes and reduce FX risks.
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While other leading markets are yet to follow Switzerland’s lead and mandate automated trading of currency, the industry moves inexorably towards automation. But the push creates new market risks for both the buy side and sell side.
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Corporate treasurers and asset managers are turning to innovative predictive tools that help identify FX volatility and liquidity opportunities, bankers say. However, not everybody on the buy side is convinced the new solutions are for them.
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Despite depreciation risk next year, amid the global currency war, market players say the battle between RMB offshore financial hubs and trading volumes will go from strength to strength.
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The Ukrainian hryvnia has been ravaged in 2014, with the conflict with Russia exacerbating the challenges faced by this highly indebted economy.
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New market regulations governing the FX industry have done more harm than good for FX trading desks, according to an October survey by TradeTech FX.
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The disruption associated with the electronification of FX trading has overwhelmed some market participants, but while policymakers ponder stronger efforts to regulate market structure, especially high-frequency trading (HFT), market players say the latest generation of innovations are now revitalizing FX trading.
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The Hong Kong-Shanghai Stock Connect, which was launched amid much fanfare on November 17, has triggered a jump in CNH-funded arbitrage opportunities. However, rising Stock Connect volumes and easing by the People’s Bank of China – triggering a convergence between onshore and offshore rates – will remove current funding advantages.
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It’s time to get some perspective back into the debate about global foreign exchange.
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A war of all against all in currency markets will not be pretty. For some countries it may also be too little, too late. The International Monetary Fund has failed in its role as the arbiter of currency values.
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Deutsche Börse's acquisition of a minority stake in R5FX, the London-based electronic trading venue specializing in emerging markets (EM) FX, is the latest in a series of strategic moves by the exchange to break into the FX market. Up to 20 banks have signed up for the March launch of a bank-to-bank liquidity pool for EM FX.
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It has been a chastising few years for currency hedge funds. Several high-profile currency managers have closed down due to poor performance while many that have survived have struggled with redemptions. But some hedge fund allocators are predicting an imminent return to form for FX strategies.
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Despite cutting rates to a record low of 0% end-October, the Swedish Riksbank is under increasing pressure to launch more radical action – from asset purchases, QE and a dual mandate that includes employment, to a currency floor – as deflation fears grow.
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Technology companies are gearing up for a potential gold rush around FX benchmark trading, amid expectations the multi-billion dollar fines imposed on banks last week will accelerate appetite for solutions to boost transparency, oversight and pricing, analysts say.
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Investment banks are keen to close the chapter on the foreign-exchange rate-rigging scandal after Wednesday’s announcement of regulatory fines totalling $4.2 billion, but more banks are expected to be fined and industry participants believe other nefarious practices should now be thoroughly investigated.
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Analysts support the Central Bank of Russia’s (CBR) response to the collapse of the rouble, arguing it will shift market expectations and could stabilize the currency in the medium-term. In an interview with Euromoney before the move, a CBR official discusses the opportunities and challenges in the regime shift.
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European proposals for mandatory clearing of non-deliverable forwards (NDFs) published in October seemed to be a decisive step toward a new framework for FX derivatives trading. However, responses to the consultation reveal deep divisions among FX market participants over the way forward.
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Asset managers are still losing millions of pounds a year in hidden foreign-exchange bank charges, research shows, despite the advancement of money-saving solutions such as independent live benchmarks and transaction cost analysis (TCA).
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Long-awaited changes announced last week to the composition of Japan's state pension fund portfolios, combined with increasing flows into foreign – predominantly US dollar – assets from retail investors and the insurance sector, should weaken the yen, but could be storing up problems in the long term.
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Implied volatility on the Swiss franc has risen sharply in recent days, amid speculation that a referendum at the end of this month might force the Swiss National Bank to greatly increase its gold holdings.
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FX market veteran takes up new role developing digital technology and reducing business complexity across Deutsche Bank’s markets platform
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High-frequency trading is not confined to Europe and north America. Some Asia-Pacific countries are further along in embracing the strategy than others.
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The analysis of structured, semi-structured and unstructured information from multiple sources, commonly referred to as ‘big data’, could improve FX pricing as well as reduce the potential for regulatory infringements, according to technology experts.
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Backed by its robust trading relationship with China, the east Asian nation is the latest fledgling offshore renminbi hub. Market participants shed light on South Korea’s renminbi bid as internationalization of the Chinese currency gathers pace.
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The full-scale disruptive potential of social trading is beginning to become clear, according to proponents. But there are fears that it is encouraging inexperienced traders to load up with risk in the pursuit of large returns and there have been calls for tougher regulation.
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The US has reached a milestone by announcing the end of its eight-year quantitative easing stimulus programme as its economy recovers, but the news highlights the increasing policy divergence between the US and Europe. Corporates have as a result started factoring in increasing euro weakness ahead of 2015.
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The US dollar has become highly correlated with equities in recent months, conjuring up memories of the late 1990s and the dotcom boom, the last time the two asset classes rose together for such an extended period. But the differences between the two periods are as illustrative as their similarities.
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China, the dollar and oil. All three are moving in novel directions.
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The decline of the Brazilian real to a nine-year low this week seemed to mark a nadir for a currency buffeted by economic and political concerns. Analysts say, though, that things could get worse before they get better.
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Latin America’s first such deal; Pemex plans to follow.
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The ECB commenced its covered bonds purchasing programme last week, but no sooner had it started than rumours surfaced about a new plan to purchase corporate bonds. The fevered speculation demonstrates the lack of confidence in the ECB's existing plan, reviving questions about full-scale QE and its seniority in bond holdings.
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A momentary strengthening of the yen amid market panic coincided with reports the government might be having second thoughts about key planks of the reform agenda – the consumption tax and a weak yen. But analysts insist there has been no change of policy, but pension and energy reforms hold the key.
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Market participants are relatively relaxed about the impact of last year’s change to the US trading model, relative to the dire warnings from the global trade association for OTC derivatives, but global market fragmentation remains a risk.
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Commodities could be facing further weakness, amid falling demand in China and elsewhere. All eyes are again on the US, where strong growth could support prices and prevent a further sell-off of commodity currencies.
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Providing payment services is likely to become more attractive to brands with large, loyal customer bases that see value, either directly or indirectly, in processing transactions.
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Spikes of volatility have appeared in FX markets in recent weeks, prompting speculation that a long period of dormancy in currency options might be coming to an end. However, reports of a forthcoming bonanza could be exaggerated, some analysts say.
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Buoyed by its Indian success, the World Bank’s private-sector arm the International Finance Corporation (IFC) has set its sights on further extending the offshore renminbi curve.
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Turkey’s embattled investors can be forgiven feeling defensive, with economic challenges closing in on them from every side – from the Middle East crisis and strengthening dollar to the stubborn current-account deficit.
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European bond and equity markets have been happy hunting grounds for foreign investors of late, and demand for European assets has helped support the euro, despite economic headwinds. However, bankers now report a shift to increased hedging of European exposures, leaving the region’s currency relatively unprotected against interest-rate differentials.
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With various regulatory initiatives demanding that financial institutions gather and disclose information relating to customers, a number of firms have responded to what they see as a market opportunity to develop customer-identity screening services, with a single, industry-wide utility seen, by some, as the end-goal.
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Over-the-counter (OTC) derivatives market reform outside the US and Europe will be closely monitored by companies who use these derivatives to manage foreign-currency earnings exchange-rate risk.
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Foreign-exchange technology provider MahiFX is seeking to challenge the dominance of the leading banks in the electronic FX market by eating into their share of trading and sales with second-tier banks and brokers.
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The dollar has begun what many expect will be a prolonged march higher after a multi-year bear run. A strengthening greenback has traditionally been bad news for emerging markets and the early signs suggest this time will be no different.
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It has been a gruelling few days for Latin American currencies, which have borne the brunt of asset allocations away from EMs and into an invigorated greenback, ahead of expected rates rises – but analysts believe the longer-term outlook for the Mexican peso looks brighter than most other EM currencies.
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Post-Scottish referendum, UK political risks have not gone away, while the fiscal picture remains dire.
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The debate around how to strengthen the regulation of FX markets continues to rage. Advocates highlight examples of regulations that have benefited the markets in the long run, while detractors warn of unintended consequences and cite their own examples of risk-mitigating measures evolving naturally within the industry.
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It has been another torrid month for the rouble, but the possibility of tensions with Ukraine abating in the near term and a package of monetary reforms next year offer hope for more trading opportunities.
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As the Fed prepares for rate hikes, the hope is that the ECB stands ready to take over its mantle as chief global liquidity provider, raising the spectre of the euro becoming a more attractive funding currency for carry strategies.
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Market players are hoping Draghi can overcome liquidity and scale challenges in his much-trumpeted ABS purchase plan – seen by some as QE by another name – but if he fails the central bank will have no option but to resort to QE, say analysts.
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The Brazilian real has been rising in recent weeks on hopes opposition candidate Marina Silva will beat president Dilma Rousseff in a run-off election in October. With the Brazilian economy faltering and the election outcome still on a knife edge, the real’s outlook – and the country’s macro framework, more generally – remains unclear.
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Analysts are divided over the outlook for the euro and the likely potency of the ECB latest monetary-easing measures, after Thursday’s meeting that saw the central bank cutting rates and announcing the October launch of an ABS purchasing programme. While the measures will buoy credit at the front-end, the jury is out on full-scale QE in the coming months.
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This summer has seen a long-term bull market for the New Zealand dollar finally taper off as carry traders cash out of the Kiwi.
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Despite the volatility in its price and its still-limited practical use, an increase in the number of merchants accepting Bitcoin in recent months has ignited optimism among digital-currency proponents.
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The CureCoin Forum has teamed up with Stanford University to launch a new ethical cryptocurrency that aims to find cures for common, life-threatening illnesses, such as cancer and Alzheimer’s, by bringing together science and the craze for cryptocurrencies.
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CPI inflation fell into negative territory in July, and the market expects the Polish monetary authority to cut rates, but currency concerns, relatively buoyant growth and supply-side drivers of disinflation argue for caution.
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Bulgaria’s ambition to join the euro is slipping further out of reach as the bank run on its fourth-largest lender Corporate Commercial Bank (KTB) brings allegations of corruption and political instability to the fore and further diminishes the country’s standing in Brussels, say analysts.
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Euromoney Research Group presents a detailed report into the swap execution facilities (SEFs) sector. The bespoke content offers insight into the confusion over the adoption of these rules and looks at the future opportunities for all market participants.
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Bets of a re-peg of the Hong Kong dollar have resurfaced in the currency markets as the Hong Kong Monetary Authority (HKMA) intervened to inject dollar liquidity to the tune of $9.86 billion several times since July 1 on the back of large inflows into Hong Kong during the past few months.
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Japan’s Q2 contraction, thanks to the April sales tax, has exacted a short-term toll on output, but Abenomics – a policy of delivering inflation and shocking the economy into growth – is still on track, say economists.
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While the ECB is preparing the market for softer monetary conditions, the Federal Reserve is gradually tapering its quantitative-easing programme and the market expects rate hikes to commence from Q3 2015. However, falling US real rates will complicate Draghi’s bid to weaken the euro.
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Emerging market (EM) currencies are behaving more like G10 currencies, at least in terms of the way they respond to changes in US rates, according to research by Nomura.
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SuperDerivatives has gone live with a new trading platform to trade exotic foreign-exchange options electronically, and plans to expand the number of tradable asset classes from metals and FX to include oil, equity derivatives, credit and interest rates.
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When Scott O’Malia approved the final swap execution facility (SEF) rules in August 2013, he did so “reluctantly”. His fears were realized when the regime quickly wrought international havoc. In one of his last interviews before leaving the US Commodity Futures Trading Commission (CFTC), he relives the ordeal of bringing these rules to market and highlights many of the challenges still to come.
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The foreign-exchange benchmark scandal looks set to be a boon for burgeoning peer-to-peer (P2P) currency-exchange platforms, as they capitalize on the demand for transparent and innovative solutions.
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Forced conversion planned for autumn; bill could top €4 billion, say analysts.
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High relative rates draw investors; elections weigh on rally.